20-1228 (L) 20-1278 (CON)
IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
JANE DOE, ET AL., Plaintiffs-Appellees,
v. THE TRUMP CORPORATION, ET AL.,
Defendants-Appellants, ACN OPPORTUNITY, LLC,
Non-Party-Appellant.
On Appeal from the United States District Court for the Southern District of New York, No. 1:18-cv-9936 (Schofield, J.)
BRIEF OF PLAINTIFFS-APPELLEES JANE DOE, LUKE LOE, RICHARD ROE & MARY MOE
Andrew G. Celli, Jr. O. Andrew F. Wilson EMERY CELLI BRINCKERHOFF ABADY WARD & MAAZEL LLP 600 Fifth Avenue at Rockefeller Center New York, NY 10020 (212) 763-5000 [email protected]
Roberta A. Kaplan John C. Quinn Joshua Matz Alexander J. Rodney Raymond P. Tolentino Michael Skocpol KAPLAN HECKER & FINK LLP 350 Fifth Avenue | Suite 7110 New York, NY 10118 (212) 763-0883 [email protected] Counsel for Plaintiffs-Appellees
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ...................................................................................III
INTRODUCTION ..................................................................................................... 1
STATEMENT OF THE ISSUES............................................................................... 5
JURISDICTIONAL STATEMENT .......................................................................... 5
STATEMENT OF THE CASE .................................................................................. 6
I. FACTS .......................................................................................................... 6
II. PROCEDURAL HISTORY ........................................................................12
STANDARD OF REVIEW .....................................................................................18
SUMMARY OF THE ARGUMENT ......................................................................19
ARGUMENT ...........................................................................................................23
I. THE DISTRICT COURT CORRECTLY DENIED DEFENDANTS’ MOTION TO COMPEL ARBITRATION .................................................23
A. Defendants cannot invoke ACN’s arbitration agreements through equitable estoppel .................................................................................23
1. Defendants are not entitled to equitable estoppel under state law ..24
2. Defendants are not entitled to equitable estoppel under this Court’s precedents in any event ...................................................................27
3. Defendants’ reliance on Grigson is misplaced ................................37
B. Defendants waived any right to compel arbitration .............................40
C. The district court was correct to resolve these issues itself ..................45
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1. Defendants waived their new arbitrability position by arguing the opposite to the district court ............................................................46
2. Defendants’ new arbitrability position is meritless .........................48
II. THE DISTRICT COURT CORRECTLY DENIED ACN’S CROSS-MOTION TO COMPEL ARBITRATION .................................................59
A. The district court lacked subject-matter jurisdiction over ACN’s motion to compel arbitration ................................................................62
B. The FAA does not allow ACN to compel arbitration of claims brought against Defendants ..................................................................67
C. ACN’s cross-motion to compel arbitration was procedurally improper ................................................................................................70
D. ACN’s “equitable estoppel” theory is forfeited and meritless .............74
1. ACN’s “equitable estoppel” theory is forfeited ..............................75
2. ACN’s “equitable estoppel” theory is meritless ..............................75
CONCLUSION ........................................................................................................79
CERTIFICATE OF COMPLIANCE .......................................................................80
CERTIFICATE OF SERVICE ................................................................................81
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TABLE OF AUTHORITIES
Page(s)
Cases
Adams v. Suozzi, 433 F.3d 220 (2d Cir. 2005) .................................................................................48
Allianz Ins. Co. v. Lerner, 416 F.3d 109 (2d Cir. 2005) .................................................................................48
Am. Home Assurance Co. v. A.P. MollerMaersk A/S, 609 F. App’x 662 (2d Cir. 2015) .........................................................................47
Arthur Andersen LLP v. Carlisle 556 U.S. 624 (2009) ................................................................................ 19, 23, 70
AstraOil Co. v. Rover Navigation, Ltd., 344 F.3d 276 (2d Cir. 2003) .................................................................................35
Bankers Conseco Life Ins. Co. v. Feuer, No. 16 Civ. 7646, 2018 WL 1353279 (S.D.N.Y. Mar. 15, 2018) .......................32
Bein v. Heath, 47 U.S. (6 How.) 228 (1848) ...............................................................................31
Bensadoun v. Jobe-Riat, 316 F.3d 171 (2d Cir. 2003) .................................................................................33
Carter v. TD Ameritrade Holding Corp., 721 S.E.2d 256 (N.C. Ct. App. 2012) ..................................................................25
Choctaw Generation Ltd. P’ship v. Am. Home Assur. Co., 271 F.3d 403 (2d Cir. 2001) .......................................................................... 35, 36
Community State Bank v. Knox 523 F. App’x 925 (4th Cir. 2013) ................................................................. 66, 67
Community State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011) ...........................................................................67
Contec Corp. v. Remote Solution, Co., Ltd., 398 F.3d 205 (2d Cir. 2005) ......................................................................... passim
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Cooper v. Ruane Cunniff & Goldfarb Inc., No. 16 Civ. 1900, 2017 WL 3524682 (S.D.N.Y. Aug. 15, 2017) .......................32
Cotton v. Slone, 4 F.3d 176 (2d Cir. 1993) ........................................................................ 42, 43, 45
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985) .............................................................................................69
Doctor’s Assocs. v. Alemayehu, 934 F.3d 245 (2d Cir. 2019) .......................................................................... 49, 53
Doctor’s Assocs., Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995) ...................................................................................63
Fensterstock v. Educ. Fin. Partners, No. 08 Civ. 3622, 2012 WL 3930647 (S.D.N.Y. Aug. 30, 2012) .......................32
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) .......................................................................... 53, 57, 58, 59
Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) ...................................................................................... 49, 69
Grigson v. Creative Artists Agency, LLC, 210 F.3d 524 (5th Cir. 2000) ....................................................................... passim
Guyden v. Aetna, Inc., 544 F.3d 376 (2d Cir. 2008) .................................................................................18
Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576 (2008) .............................................................................................63
Hamer v. Neighborhood Hous. Servs. of Chicago, 138 S. Ct. 13 (2017) .............................................................................................48
Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) ...........................................................................................53
Hermès of Paris, Inc. v. Swain, 867 F.3d 321 (2d Cir. 2017) .................................................................................63
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Hispanic Soc. of New York City Police Dep’t Inc. v. New York City Police Dep’t, 806 F.2d 1147 (2d Cir. 1986)...............................................................................72
Holland v. Florida, 560 U.S. 631 (2010) .............................................................................................38
Houston Bus. Journal, Inc. v. Office of Comptroller of Currency, U.S. Dep’t of Treasury, 86 F.3d 1208 (D.C. Cir. 1996) .............................................................................64
In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, & Prods. Liab. Litig., 838 F. Supp. 2d 967 (C.D. Cal. 2012) .................................................................51
Int’l Ore & Fertilizer Corp. v. SGS Control Servs., Inc., 38 F.3d 1279 (2d Cir. 1994) .................................................................................26
ISC Holding AG v. Nobel Biocare Fin. AG, 688 F.3d 98 (2d Cir. 2012) ...................................................................................71
JLM Indus. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004) .............................................................. 35, 36, 67, 68
Katel Liab. Co. v. AT&T Corp., 607 F.3d 60 (2d Cir. 2010) ...................................................................................72
Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933) .............................................................................................31
Kramer v. Hammond, 943 F.2d 176 (2d Cir. 1991) .......................................................................... 41, 43
Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) .......................................................... 37, 54, 55, 56
Krock v. Lipsay, 97 F.3d 640 (2d Cir. 1996) ...................................................................................25
La. Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 626 F.3d 156 (2d Cir. 2010) ......................................................................... passim
Lavigne v. Herbalife, Ltd., 967 F.3d 1110 (11th Cir. 2020) .................................................................... 50, 54
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Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20 (2d Cir. 1995) .............................................................................. 41, 44
Martindell v. Int’l Tel. & Tel. Corp., 594 F.2d 291 (2d Cir. 1979) .................................................................................72
Matter of Arbitration Between Chung & President Enters. Corp., 943 F.2d 225 (2d Cir. 1991) .......................................................................... 70, 71
Medidata Sols., Inc. v. Veeva Sys., Inc., 748 F. App’x 363 (2d Cir. 2018) ............................................................ 29, 31, 33
Meena Enters. v. Mail Boxes Etc., No. 12 Civ. 1360, 2012 WL 4863695 (D. Md. Oct. 11, 2012) ...........................49
Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017) ...................................................................... 18, 19, 33
Minneapolis-Honeywell Regulator Co. v. Thermoco, Inc., 116 F.2d 845 (2d Cir. 1941) .................................................................................72
Mooney v. City of New York, 219 F.3d 123 (2d Cir. 2000) .................................................................................47
Moss v. BMO Harris Bank, N.A., 24 F. Supp. 3d 281 (E.D.N.Y. 2014) ...................................................................39
New Prime Inc. v. Oliveira, 139 S. Ct. 532 (2019) ...........................................................................................76
O’Shea v. Littleton, 414 U.S. 488 (1974) .............................................................................................62
Parker v. Dacres, 130 U.S. 43 (1889) ...............................................................................................45
Patterson v. Balsamico, 440 F.3d 104 (2d Cir. 2006) .................................................................................48
Paul Revere Variable Annuity Ins. Co. v. Kirschhofer, 226 F.3d 15 (1st Cir. 2000) ..................................................................................64
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PenneCom B.V. v. Merrill Lynch & Co., 372 F.3d 488 (2d Cir. 2004) .................................................................................31
PPG Indus., Inc. v. Webster Auto Parts, Inc., 128 F.3d 103 (2d Cir. 1997) .......................................................................... 41, 43
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) .............................................................................................76
Process & Indus. Developments Ltd. v. Fed. Republic of Nigeria, 962 F.3d 576 (D.C. Cir. 2020) .............................................................................72
Pulvers v. First UNUM Life Ins. Co., 210 F.3d 89 (2d Cir. 2000) ...................................................................................75
Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115 (2d Cir. 2010) .............................................................. 27, 31, 34, 35
Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010) ...............................................................................................54
Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011) .......................................................................... 56, 57
Republic of Iraq v. BNP Paribas USA, 472 F. App’x 11 (2d Cir. 2012) .................................................................... 54, 55
Romana v. Kazacos, 609 F.3d 512 (2d Cir. 2010) .................................................................................68
Ross v. Am. Express Co., 547 F.3d 137 (2d Cir. 2008) ......................................................................... passim
Royce v. Michael R. Needle P.C., 950 F.3d 939 (7th Cir. 2020) ...............................................................................47
Schneider v. Dumbarton Developers, Inc., 767 F.2d 1007 (D.C. Cir. 1985) ...........................................................................71
Schweiker v. Hogan, 457 U.S. 569 (1982) .............................................................................................26
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SM Kids, LLC v. Google, LLC, 963 F.3d 206 (2d Cir. 2020) .................................................................................62
Smith Jamison Constr. v. APAC-Atl., Inc., 811 S.E.2d 635 (N.C. Ct. App. 2018) ........................................................... 19, 25
Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354 (2d Cir. 2008) ......................................................................... passim
Spokeo, Inc. v. Robins, 136 S. Ct 1540 (2016) ..........................................................................................64
Stern v. Marshall, 564 U.S. 462 (2011) .............................................................................................47
Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010) .............................................................................................39
Thai-Lao Lignite (Thailand) Co. Ltd. v. Government of Laos, 492 F. App’x 150 (2d Cir. 2012) .........................................................................51
Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102 (2d Cir. 2002) .................................................................................45
United States v. Morgan, 380 F.3d 698 (2d Cir. 2004) .................................................................................26
United States v. Morton Salt Co., 338 U.S. 632 (1950) .............................................................................................64
Vaden v. Discover Bank, 556 U.S. 49 (2009) ....................................................................................... passim
Vera v. Saks & Co., 335 F.3d 109 (2d Cir. 2003) .................................................................................68
Volt Info. Scis. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989) .............................................................................................67
White v. Sunoco, Inc., 870 F.3d 257 (3d Cir. 2017) .................................................................................36
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World Brilliance Corp. v. Bethlehem Steel Co., 342 F.2d 362 (2d Cir. 1965) .................................................................................74
Statutes
9 U.S.C. § 4 ...................................................................................................... passim
9 U.S.C. § 6 ..............................................................................................................73
9 U.S.C. § 16(a)(1)(B) ............................................................................................... 6
28 U.S.C. § 1332(d) ................................................................................................... 5
Rules
Federal Rule of Civil Procedure 7 ...........................................................................72
Federal Rule of Civil Procedure 24 .........................................................................71
Federal Rule of Civil Procedure 45 .................................................................. 15, 16
Federal Rule of Civil Procedure 81 .........................................................................73
Other Authorities
Wright & Miller, Fed. Prac. & Proc. Civ. § 2459 (3d ed. 2020) .............................73
Wright & Miller, Fed. Prac. & Proc. Juris. § 3974.1 (4th ed. 2020) .......................26
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INTRODUCTION
Defendants carried out a fraudulent scheme that harmed Plaintiffs. While
accepting huge, secret payments from a multi-level marketing company called ACN,
Defendants publicly insisted that they were independent of the company—and used
that carefully cultivated fictitious independence, along with their wealth and
celebrity and a barrage of false statements, to induce Plaintiffs and many others to
invest in ACN’s “business opportunity.” Although ACN benefitted too, Defendants
instigated, constructed, and perpetrated the fraudulent scheme, drawing on a
playbook that they also deployed elsewhere. Ultimately, it was Defendants’ scheme
that persuaded Plaintiffs to invest and, as a result, Plaintiffs suffered significant
losses as Defendants walked away with millions. Plaintiffs therefore filed this
lawsuit to obtain redress from Defendants.
Following procedural gamesmanship that lasted until the district court denied
Defendants’ motion to dismiss in part, Defendants filed a motion to compel
arbitration. Defendants are not actually parties to any arbitration agreement with
Plaintiffs. Nevertheless, Defendants sought to invoke the agreement between
Plaintiffs and ACN, which Defendants never signed, which makes no mention of
Defendants, and which is not the basis for any of Plaintiffs’ claims. Defendants
sought to justify this maneuver by asserting that Plaintiffs—in signing contracts with
ACN—must have understood that they were also entering into agreements with
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Defendants. But as the district court properly recognized, Defendants’ argument
“turns the Amended Complaint on its head.” A531. Specifically, the Amended
Complaint alleges that Defendants deliberately hid from Plaintiffs and the public the
true nature of their relationship with ACN. This deceit, moreover, was hardly a stray
detail: It is central to the fraudulent scheme alleged in the Amended Complaint,
which depended on creating the false impression that Defendants were in fact
independent of ACN.
Given this course of conduct—which involved actively sowing falsehoods
and confusion about their ties to ACN—Defendants have no basis now to assert that
their relationship with ACN was so clear that agreements with ACN were self-
evidently also contracts with Defendants. For that reason, among several others,
Defendants cannot rely on equitable estoppel to compel arbitration. In any event, as
the district court held, Defendants’ improper procedural tactics intended to achieve
delay and other strategic advantage in the district court resulted in waiver of their
claimed entitlement to arbitrate. Finally, there is no force to Defendants’ newly
minted contention that these questions must themselves be decided by an arbitrator.
Defendants unequivocally waived that argument below by asking the district court
to decide the very issue that they now claim it cannot decide. And even if
Defendants’ “arbitrability” contentions were to be considered on the merits, they
would fall short for two reasons: First, this is a question of contract formation
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reserved by law for judicial determination; and second, there is no clear agreement
between Plaintiffs and Defendants to let an arbitrator decide these issues.
That leaves ACN—which, unlike Defendants, does have a contract with
Plaintiffs, but is not a party to this case. This point bears repetition since ACN keeps
implying otherwise: Plaintiffs have alleged no claims against ACN; ACN faces no
risk of liability or damages; and ACN has disclaimed any obligation to indemnify
Defendants—who, it seems, made a strategic decision not to implead ACN into the
case. In light of ACN’s apparent belief that it is somehow a de facto “defendant in
all-but-name” (whatever that means), ACN Br. at 20, ACN could have filed a motion
to intervene to protect any interests that it actually believes are threatened by
Plaintiffs’ lawsuit—yet it chose not to do so. Now, ACN seeks to have it both ways:
it wants none of the risks or responsibilities of being a party, with all the procedural
prerogatives afforded only to parties.
It cannot do that. For good reason, no court has ever held that a non-party
subpoena recipient can hijack a federal proceeding and dispossess an Article III
judge of jurisdiction over the case or controversy before her. Nor has any court ever
held that, in so doing, a non-party could force a plaintiff to arbitrate claims against
a defendant with whom it does not have an arbitration agreement. Neither the Federal
Arbitration Act (FAA), nor the Federal Rules of Civil Procedure, nor principles of
equity afford any basis for ACN’s unprecedented claim that it can unilaterally deem
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itself a party to this case (without actually being a party), respond to a document
subpoena by moving to compel arbitration (without any jurisdictional or procedural
basis), and compel Plaintiffs to arbitrate their claims against Defendants (with whom
Plaintiffs have no agreement to arbitrate anything). If accepted, ACN’s position
would threaten the orderly administration of the federal courts and make a mockery
of the bedrock principle that arbitration is a matter of consent. It is unsurprising that
the district court rejected these unwarranted assertions out of hand.
At bottom, these appeals require nothing more than a return to first principles
of contract law and federal procedure. A party cannot enforce an agreement that they
did not sign, that does not mention them, and as to which they are not an intended
third-party beneficiary—particularly when they have knowingly misled a signatory
to the contract by concealing secret connections to another signatory. A party waives
their ability to pursue arbitration when they deliberately resort to procedural
gamesmanship aimed at first using the federal courts to obtain a strategic advantage
before seeking arbitration. A party cannot argue on appeal that the district court
lacked authority to decide a question when they took the opposite position below
and were dissatisfied with the result. And a non-party cannot decide against moving
to intervene, but then ignore the ground rules of litigation and the FAA by seeking
to a compel the actual parties into arbitration. None of these principles should be
controversial. The decision below should be affirmed.
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STATEMENT OF THE ISSUES
The questions presented by Defendants’ appeal are as follows:
1. Whether the district court correctly applied the doctrine of equitable estoppel in concluding that Plaintiffs’ contract with ACN does not require them to arbitrate disputes with Defendants.
2. Whether the district court correctly concluded that Defendants waived any
such asserted right to compel Plaintiffs into arbitration.
3. Whether the district court correctly adjudicated these questions itself after Defendants expressly invited it to do so.
The questions presented by ACN’s appeal are as follows:
1. Whether the district court had jurisdiction over ACN’s motion to compel Plaintiffs’ claims against Defendants into arbitration.
2. Whether ACN may invoke its arbitration agreement with Plaintiffs to obtain an order compelling Plaintiff to arbitrate their claims against Defendants, with whom they never agreed to arbitrate anything.
3. Whether it was procedurally proper for ACN—as non-party that decided
against seeking intervention in this litigation—to file a motion to compel arbitration of Plaintiffs’ claims against Defendants.
4. Whether ACN may invoke generalized notions of equity to compel
arbitration of Plaintiffs’ claims against Defendants.
JURISDICTIONAL STATEMENT
The district court had jurisdiction under 28 U.S.C. § 1332(d) because the
proposed class here has at least 100 members, there is minimal diversity between the
parties, and the aggregate amount in controversy exceeds $5 million. It lacked
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jurisdiction over ACN’s non-party cross motion to compel arbitration for the reasons
given herein. See infra, 62-67. This Court has jurisdiction under 9 U.S.C.
§ 16(a)(1)(B) because the district court denied petitions from Defendants and ACN
(on April 8 and 9, 2020, respectively) to order arbitration. A35. Defendants timely
filed a notice of appeal on April 13, 2020, and ACN timely filed a notice of appeal
on April 16, 2020. A36-37.
STATEMENT OF THE CASE
I. FACTS
In the early 2000s, the “Trump” brand got a badly needed reboot when
Defendant Donald J. Trump hosted The Apprentice and The Celebrity Apprentice.
A230-35. These primetime “reality” television shows “portrayed Trump to an
audience of millions around the country as a credible and authoritative voice in the
world of business.” A232-33. As a result, many ordinary Americans came to
associate the name “Trump” with business savvy and entrepreneurial success. A232,
235. Trump himself personified this brand, and he and the other Defendants
collectively operated and controlled it. A213-14.
The essential theory of this case is that Defendants cashed in on that brand by
assuring ordinary working-class Americans that near-worthless investments were
really the secret to financial success. Between 2005 and 2015, Defendants came up
with a scheme to sell full-throated praise from Donald Trump to doubtful business
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ventures in exchange for huge sums of money. A223, 343-365. These financial
arrangements were kept secret from the public and from intended audiences: When
touting a business, Donald Trump would not disclose any payment for his
endorsement and would falsely assert that his seals of approval were heartfelt,
carefully vetted, and not for sale. A215, 217-19, 271-79. Selling Trump
endorsements this way—privately bought and paid for, publicly appearing to be
genuine—made them extra-powerful and convincing. A217. In other words, when
Trump said “Trust me,” people listened. Id.
Plaintiffs in this case are four individuals of limited financial means who fell
victim to Defendants’ deception. A213. They are a hospice worker, a self-employed
formerly homeless man, a food delivery driver, and a mother of three who works at
a national retail store. A287, 296, 300, 305. Each was persuaded to sign up for a
business opportunity with Non-Party Appellant ACN after hearing Donald Trump
sing its praises. Specifically, Trump encouraged them to become Independent
Business Owners (“IBOs”) associated with ACN. A213, 243. IBOs marketed ACN-
distributed videophones and other products and services through a multi-level
marketing model. A243-45.
Statistically speaking, multi-level marketing arrangements are not a winner’s
game—nearly all who try them lose money. A 265. And some prospective IBOs
were skeptical upon first hearing ACN’s own sales pitch. See, e.g., A287-88.
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Enter Defendants. In exchange for millions of dollars in secret payments from
ACN, they held Donald Trump out as a genuinely independent evaluator of the ACN
IBO opportunity, since Trump reassured prospective IBOs in the strongest possible
terms that it was a sure winner. A213. Defendants conveyed this message in
numerous forums, including in recruiting videos, in print materials, online, on stage
at more than a dozen large events, and in two episodes of The Celebrity Apprentice,
where contestants seeking a job at the Trump Organization promoted ACN and
Defendants Ivanka Trump and Donald Trump Jr. also appeared in support of the
company. A245-55.
Defendants’ consistent message to potential IBOs had three key components:
(1) that IBOs would have a reasonable probability of commercial success if they
bought into ACN;1 (2) that Donald Trump was independently endorsing and
promoting ACN because he believed that it offered a reasonable probability of
commercial success (rather than because Defendants were being paid);2 and (3) that
1 For example, “You have a great opportunity before you at ACN without any of the risks most entrepreneurs have to take.” A259 (emphasis added). “The absolute truth is that this [videophone] technology will be present in every home within the next several years.” A266. 2 For example, Interviewer: “[W]hy do you keep coming back? What is it about ACN? Certainly not for any money.” Trump: “No.” Interviewer: “It’s for the love of the organization. Tell us why you love ACN?” Trump: “[T]he reason I’m doing it is because I really have . . . just a special relationship with the founders, they are good people, they are hard workers, they love what they are doing, they love the people
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Trump’s endorsement was predicated on Defendants’ due diligence, inside
information, and/or personal experience with ACN and the IBO investment.3 A258,
324.
As the Amended Complaint explains in detail, Defendants’ message, which
induced Plaintiffs and thousands of others like them into ACN, was knowingly and
materially false in all respects. A215-16, 258-81. The ACN business opportunity did
not offer a realistic possibility of commercial success, A260-62, 265, 266-69, 271;
Defendants had done little to no diligence relating to the particular statements they
were making, A281; and Defendants were really endorsing the ACN business
opportunity because they were being paid millions of dollars to do so—a fact they
consistently misrepresented and obscured, A271-77.
Misleading the target audience about Defendants’ ties with ACN was crucial
to this scheme. A215, 258. To foster the illusion of independent judgment, Trump
professed deep personal affinity for ACN and its founders, while at the same time
omitting any mention of the lavish payments he received from ACN so that his
audience would not realize that his praise had been purchased. A272-75. He told
in the room. . . . [T]hey are really good people with great ideas and they want to help other people.” A274, 275. 3 For example, “When evaluating a business opportunity, people need to look for strong leadership, a solid track record, success stories, a strong product people really need and want and a clear plan for the future. ACN has all of these things.” A304, 307.
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audiences, for example, that he had chosen to “give” an endorsement to ACN
because he “really believe[d]” in it. A272. He told audiences “I’ve always had a
good feeling about ACN; I just feel good about it.” A276. He told audiences “I do
this . . . because I love it because I think this is a great company.” A276. And he told
audiences “[t]he reason I’m doing it is because I really have . . . just a special
relationship with the founders, they are good people.” A275. Not once did he
mention being paid millions. A276-77.
Even when asked point blank, Trump made false and misleading statements
about the nature of his relationship to ACN. In one interview, for example, he
disclaimed any financial motive, saying that he promoted ACN out of respect for its
co-founders and “would not be doing it ‘for the money.’” A276. And at a 2013 event,
Trump again told an interviewer that he was not endorsing ACN “for any money.”
A274. Consistent with these statements, “every Plaintiff recalls watching videos
featuring Trump and being left with the same understanding—that Trump’s
endorsement was not in exchange for any compensation from ACN.” A276.
Each Plaintiff had initially approached the ACN recruitment process with
skepticism, and for each of them, Defendants’ fraudulent statements were the
“turning point.” A287-90, 296-97, 300-02, 306-08. After they signed up, and as they
struggled to recoup their initial investments, each Plaintiff was further persuaded by
Defendants’ endorsement to invest even more. A290-93, 298-99, 303-04, 308-10.
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Looking back, each Plaintiff recalls specific statements from Defendants that
convinced them to invest. A289, 293-94, 297-98, 304, 307. Each Plaintiff also recalls
being impressed by ACN’s association with Defendants’ brand, including through
ACN’s appearances on The Celebrity Apprentice. A288-89, 296, 301, 306, 307, 309.
None of them would have signed up but for Defendants’ knowingly fraudulent
promotion. A290, 296, 301-02, 307-08.
ACN has represented—and it is assumed for purposes of these appeals—that
Plaintiffs each entered into a contract with ACN upon paying the IBO enrollment
fee. A425. Defendants are not parties to those contracts, which do not mention
Defendants at all. To the contrary, the contracts make clear that the signatory’s “IBO
relationship is with ACN Opportunity, LLC, and not with any ACN Provider”—a
defined term that includes service providers and other third parties with whom ACN
transacts business. A436 ¶ 3 (emphasis added); see also A439 ¶ 3; A442 ¶ 3. The
arbitration clauses contained in the IBO agreements similarly reflect that Plaintiffs
are entering into an agreement exclusively with ACN and not with anyone else:
In the event of a dispute between me and ACN as to our respective rights, duties and obligations arising out of or relating to this Agreement, it is agreed that such disputes shall be exclusively resolved through binding arbitration before the American Arbitration Association pursuant to the Commercial Rules of Arbitration.
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A436 ¶ 16; A439 ¶ 16 (emphasis added); see also A442 ¶ 17.4
Plaintiffs were IBOs for varying amounts of time, during which Defendants’
false and fraudulent statements induced each of them to spend (and lose) money. See
A287-310. In the end, each came to realize that Trump’s message was a lie and
decided to cut their losses. A219, 295, 299, 305, 310. None of them succeeded in
earning back the money Defendants caused them to “invest.” A295, 299, 305, 310.
II. PROCEDURAL HISTORY
A. Defendants decide not to file a motion to compel arbitration, but change their mind and file after denial of their motion to dismiss
In October 2018, Plaintiffs commenced this putative class action against
Defendants. A43-206, 209-398. Their federal claims, now dismissed, alleged a
pattern of mail and wire fraud. A372-80, 399. Their state law claims, which remain
live, allege common-law fraud, negligent misrepresentation, and violations of state
4 ACN tweaked the IBO agreements’ arbitration provision in 2016. Compare A436 (2013 version), and A439 (2014 version), with A442 (2016 version). The new language further underscored that the provision applied only between ACN and the IBO: “ACN and I agree that . . . the Dispute Resolution Provisions in the ACN Policies and Procedures shall control. The Dispute Resolution Provisions require . . . that ACN and I will resolve all disputes through binding arbitration before the American Arbitration Association pursuant to the Commercial Rules of Arbitration. Both ACN and I agree that all disputes will be resolved on an individual basis . . . .” A442 ¶ 17 (emphases added).
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consumer-protection statutes prohibiting unfair and deceptive advertising practices
arising from Defendants’ statements about ACN. A380-396.5
Early on, Defendants acknowledged that they were aware of the arbitration
provision in ACN’s IBO agreements. In fact, they mentioned that provision in the
their very first line of argument before the district court. See SA58 (citing D. Ct.
ECF No. 46 at 1). But they repeatedly disregarded and declined any intention to
invoke it. See SA58-59 (collecting examples in the record); SA4 (listing anticipated
motions, not including any motion to compel arbitration). The parties thus prepared
for third-party discovery to be conducted by both sides, and the district court
permitted service of document-preservation subpoenas, including eight such
subpoenas served on Plaintiffs’ friends and family members in January 2019. SA59.
Around the same time, Defendants moved to dismiss the original Complaint.
A16. Plaintiffs amended and, in February 2019, Defendants again moved to dismiss,
asking the district court to decide and terminate the case. A17-18.
Several months later, in July 2019, Defendants filed a letter informing the
district court—for the first time, eight months into the litigation and contrary to their
prior representations and course of conduct—that they “ha[d] determined . . .
Plaintiffs’ claims are arbitrable” and intended to file a motion to compel arbitration,
5 The district court found good cause for Plaintiffs to proceed under pseudonyms for an initial pre-trial period. A207.
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but only if the case survived dismissal. SA14. In other words, Defendants admitted
that they were waiting until the district court decided the pending motion to dismiss
before filing their anticipated motion to compel. SA14. Five days later, on July 24,
2019, the district court granted Defendants’ motion to dismiss as to the federal
claims but denied their motion as to Plaintiffs’ state law claims. A399-424.
Because that result was not fully to their liking, Defendants followed through
on their motion to compel arbitration, citing the arbitration clause in ACN’s IBO
agreements—which Defendants did not sign, and which do not mention Defendants.
A21. By then it was September 2019, nearly a year into the litigation, and Plaintiffs
had expended significant energy and resources in federal court.
Defendants argued that they were entitled to arbitrate the merits of Plaintiffs’
claims against them under the doctrine of equitable estoppel, and that any such
entitlement to arbitrate was not waived. See SA24-48, SA79-93. Significantly,
Defendants did not argue that an arbitrator should resolve either of those issues in
the first instance. In fact, their motion rested on the contrary premise that these
questions were for the district court to decide. The relief they sought below was “an
order compelling Plaintiffs to arbitrate the state law claims that survived Defendants’
motion to dismiss.” SA29.
While Defendants’ motion to compel arbitration remained pending, the
district court allowed discovery to proceed. See A425-26. Both Plaintiffs and
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Defendants issued document subpoenas to various non-parties, including ACN. See
SA161, 166.
On April 8, 2020, the district court denied Defendants’ motion to compel
arbitration on two independent grounds. A522-37. First, with respect to the issue of
equitable estoppel, it concluded that Defendants had failed to adequately “explain
how Plaintiffs agreed to arbitrate with them even though Defendants were not parties
to the respective Agreements between Plaintiffs and ACN.” A527, 532. In resolving
this issue, the district court construed and applied Second Circuit precedent, but
noted an unbriefed argument that under Supreme Court precedent, North Carolina
law should have governed. A527-28 n.4. Second, in the alternative, the district court
concluded that Defendants had waived any right to compel arbitration by tactically
withholding their motion to compel arbitration as they litigated aggressively for
months. A534-36.
B. ACN moves to compel arbitration in response to a subpoena
Meanwhile, the non-party subpoena that Plaintiffs served on ACN under
Federal Rule of Civil Procedure 45 sought a discrete set of documents in ACN’s
unique possession. SA161. Plaintiffs made multiple good-faith proposals to narrow
the scope of ACN’s production, but ACN categorically refused to engage in any
discussion about the scope of production. SA100-101.
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In January 2020, Plaintiffs were forced to move to compel ACN to produce
responsive documents under Rule 45(d). A 443-44. ACN responded with a brief “in
Opposition to Plaintiff’s Motion to Compel Compliance with Subpoena and in
Support of Cross-Motion to Compel Arbitration.” SA108. This filing sought
arbitration of ACN’s “discovery dispute” with Plaintiffs, as well as “all other
disputes arising out of or in connection with their IBO Agreements.” SA120-21.
In this period, ACN also sent arbitration demands to Plaintiffs. A490-91. The
AAA declined those demands as procedurally deficient because ACN did not
provide signed IBO agreements for Plaintiffs. A493.
On April 9, 2020, ruling from the bench, the district court granted in part
Plaintiffs’ motion to compel subpoena compliance and denied ACN’s cross-motion
to compel arbitration. A556-58, 563-66; see also A538-539 (written order). In
denying the cross-motion, the district court noted “ambiguity” as to whether ACN
sought to compel arbitration of the entire case or only of ACN’s subpoena
obligations. A553. As to the former, the district court held ACN lacked “standing to
do that.” A558. As to the latter, it concluded that (1) a non-party discovery dispute
between ACN and Plaintiffs’ did not implicate the arbitration agreement; and (2)
there was no “jurisdiction to compel arbitration” given the improper posture in which
ACN’s motion arose. A556-57.
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C. Defendants and ACN both appeal and seek a stay
In April 2020, Defendants and ACN each appealed the district court’s orders
denying their motions to compel arbitration, A541, 543, and sought to stay all
proceedings pending appeal, A36-37. The district court denied a stay. A596. After
carefully weighing the pertinent factors, it concluded that neither Defendants nor
ACN were likely to succeed on appeal. A608. The district court again stressed that
ACN had offered no sound basis to “compel Plaintiffs to arbitrate Plaintiffs’ claims
against Defendants—or even a discrete discovery dispute—in a litigation to which
ACN is not a party.” A602-03.
Defendants and ACN then filed stay motions in this Court, and Defendants
requested an administrative stay during the pendency of their stay motion. ECF Nos.
58, 59, 84. While Plaintiffs opposed the stay motions, to facilitate their expeditious
disposition, Plaintiffs did not oppose an administrative stay. ECF No. 72. This Court
entered an administrative stay on May 29, 2020, ECF No. 78, prompting the district
court to halt all proceedings, SA.174.
After Defendants missed the deadline to file their opening merits brief,
Plaintiffs filed a motion to establish an expedited briefing schedule, lift the
administrative stay, and deny Defendants’ stay motion. ECF No. 132. The Court
granted Plaintiffs’ motion for an expedited briefing schedule and granted a “stay
until the appeal is heard (or submitted in the event oral argument is not requested).”
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ECF No. 139. Plaintiffs then sought clarification whether the expedited briefing
schedule applied to ACN, which by then also had missed its deadline to file. ECF
No. 142. The Court issued an order clarifying that its prior order applied to ACN,
including the previously ordered “stay pending disposition of the appeal.” ECF No.
145.6
STANDARD OF REVIEW
This Court reviews de novo a district court’s legal conclusion that a movant
is not entitled to compel arbitration. Meyer v. Uber Techs., Inc., 868 F.3d 66, 72-73
(2d Cir. 2017). The district court’s waiver decision is also reviewed de novo, with
the underlying factual findings reviewed for clear error. La. Stadium & Exposition
Dist. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 626 F.3d 156, 159 (2d Cir.
2010).
Neither Defendants nor ACN have submitted any evidence other than the
contracts Plaintiffs are assumed to have signed. See A425. The factual universe is
therefore limited to those contracts and the allegations of the Amended Complaint,
which the Court must accept as true. See Guyden v. Aetna, Inc., 544 F.3d 376, 379
6 Defendants and ACN ask this Court to extend the existing stay until issuance of the mandate. That request should be denied. For the reasons set forth in Plaintiffs’ stay briefing, as well as those in the district court’s well-reasoned opinion, Defendants and ACN have failed to justify the extraordinary remedy of a stay pending appeal.
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n.1 (2d Cir. 2008); Meyer, 868 F.3d at 74. The Court must draw all reasonable
inferences in favor of the non-movants—here, Plaintiffs—in assessing those facts.
Meyer, 868 F.3d at 74.
SUMMARY OF THE ARGUMENT
I. The district court properly denied Defendants’ motion to compel arbitration.
There are four independent grounds on which this Court should affirm that decision.
First, in Arthur Andersen LLP v. Carlisle, the Supreme Court held that state
contract law—not federal common law—determines whether a non-signatory can
compel arbitration under a theory of equitable estoppel. 556 U.S. 624, 630-31
(2009). Under North Carolina law, which governs here, Plaintiffs can be forced to
arbitrate against a non-signatory only if their claims specifically seek to enforce the
contract at issue. See Smith Jamison Constr. v. APAC-Atl., Inc., 811 S.E.2d 635, 638-
40 (N.C. Ct. App. 2018). In this case, Plaintiffs’ claims against Defendants are based
on state statutory and common law obligations, not Plaintiffs’ contracts with ACN.
Because Plaintiffs do not seek to impose liability on Defendants based on their
contracts with ACN, or to somehow enforce their contracts with ACN against
Defendants, North Carolina precludes Defendants’ reliance on the doctrine of
equitable estoppel. Although North Carolina law was not briefed below, Plaintiffs
squarely argued that equitable estoppel does not apply here and may seek affirmance
of that conclusion based on any contention or ground supported by the record.
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In the alternative, if this Court applies its own articulation of the equitable
estoppel standard (which generally predates Arthur Andersen), there are two
separate grounds on which to affirm the decision below. The first is that Defendants
have not alleged a sufficient relationship among the parties to put Plaintiffs on notice
that, by agreeing to arbitrate with ACN, they would also consent to arbitrate with
Defendants. To the contrary, as alleged in the Amended Complaint, Defendants
deliberately (and successfully) concealed and misrepresented their relationship with
ACN. Regardless Defendants have failed to show that Plaintiffs’ claims are
sufficiently intertwined with ACN’s contracts to support application of equitable
estoppel: Plaintiffs’ claims do not arise under or challenge the terms of their contract
with ACN and so Plaintiffs cannot be held to that contract here.
In addition, as the district court correctly held, Defendants have waived any
asserted right to compel arbitration. Defendants strategically availed themselves of
a federal forum for many months, taking full advantage of that forum to issue third-
party subpoenas and to seek (and obtain) partial dismissal of some of the claims
against them. Defendants were up front about this—they then bluntly announced that
they would move to compel arbitration only if they were dissatisfied with the district
court’s disposition of their motion to dismiss. Federal courts do not allow parties to
engage in such procedural gamesmanship, resorting to supposed arbitration rights
only if district judges do not give them everything they want.
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Finally, Defendants argue for the first time on appeal that only an arbitrator
can decide their motion to compel arbitration. But this contention is diametrically
opposed to Defendants’ position in the district court and was thus knowingly,
irrevocably waived: Defendants cannot invite the district court to decide issues, only
to argue on appeal that the district court had no authority to make those decisions if
they are displeased with the outcome. In any event, Defendants’ new position also
fails on the merits for two independent reasons. First, whether equitable estoppel
compels Plaintiffs to arbitrate with Defendants is a question of contract formation
that cannot be delegated to an arbitrator. And second, even if that were not the case,
any such asserted delegation to an arbitrator would require clear and unmistakable
evidence that Plaintiffs consented to arbitrate threshold questions with Defendants.
Since no evidence supports that conclusion—either in the contracts themselves or in
the Amended Complaint—it would offend bedrock principles of consent to require
Plaintiffs to arbitrate anything (even arbitrability) with Defendants.
II. The district court also correctly rejected ACN’s separate request to compel
arbitration, which ACN advanced in a brief responding to a motion to compel
compliance with a non-party subpoena for documents. Indeed, ACN identifies no
court—anywhere—that has compelled arbitration of an entire dispute between
parties to federal court litigation at the behest of a non-party to that litigation.
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ACN’s efforts to justify the unprecedented order it seeks come up short in
several respects. First, ACN has failed to establish that the district court had
jurisdiction over its petition to compel arbitration. The FAA requires an independent
jurisdictional basis for such motions, determined by looking to the actual underlying
controversy between the parties. That requirement is not satisfied here because the
only actual case or controversy is between Plaintiffs and Defendants; simply put,
this litigation does not present a case or controversy between Plaintiffs and ACN.
Second, even if the district court had jurisdiction over ACN’s petition, it correctly
denied ACN’s motion because arbitration is a matter of consent. ACN cannot rely
on its agreement with Plaintiffs to force them against their will to arbitrate claims
against Defendants (with whom they never consented to arbitrate anything). Third,
ACN’s motion was procedurally improper because ACN is not a party to the case
and had no procedural authorization as a third-party subpoena recipient to file a
motion to compel arbitration. Finally, ACN’s equitable estoppel arguments—
advanced for the first time on appeal—are both forfeited and meritless. Equitable
estoppel is a doctrine applicable only to non-signatories, not non-parties, and it is
bounded by well-established rules. ACN offers no basis for reimagining it as a free-
floating warrant to compel arbitration based on some kind of global assessment of
what seems fair, particularly given that ACN itself seeks to invoke equities that rest
upon a substantial mischaracterization of this case (and its own strategic choices).
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ARGUMENT
I. THE DISTRICT COURT CORRECTLY DENIED DEFENDANTS’ MOTION TO COMPEL ARBITRATION
A. Defendants cannot invoke ACN’s arbitration agreements through equitable estoppel
Defendants were not signatories to—or even mentioned in—the contracts
containing the arbitration clause they seek to invoke. And they have abandoned their
contention, rejected below, that they can invoke those contracts as agents of ACN
(perhaps because discovery confirmed that Defendants expressly disavowed any
agency relationship with ACN). See A532-33; D. Ct. ECF No. 249 at 2. As a result,
Defendants now rely exclusively on the doctrine of equitable estoppel.
Equitable estoppel may apply where a defendant seeks to compel plaintiffs to
arbitrate based on a contract between the plaintiffs and a third party. It operates,
however, only in limited circumstances that “demonstrate that the plaintiffs intended
to arbitrate [the] dispute” with the defendants when they entered into their arbitration
agreement with the third party. Ross v. Am. Express Co., 547 F.3d 137, 146 (2d Cir.
2008).
Here, the district court applied a federal common law standard of equitable
estoppel—as articulated in Second Circuit precedent—in holding that Defendants
were not entitled to compel arbitration based on Plaintiffs’ contract with ACN. In so
doing, however, the district court itself noted an unbriefed argument that North
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Carolina state law instead should govern. See A527-532 & n.4. In fact, the district
court’s observation was correct—North Carolina law does provide the applicable
standard under binding Supreme Court precedent. See Arthur Andersen LLP v.
Carlisle, 556 U.S. 624, 630-31 (2009). And the district court’s decision should be
affirmed because Plaintiffs prevail under North Carolina law. In the alternative, it
should be affirmed because Plaintiffs would also prevail under the federal common
law standard in any event.
1. Defendants are not entitled to equitable estoppel under state law
a. North Carolina allows equitable estoppel only when a suit seeks to enforce a contractual duty
In the district court, the question whether Defendants may rely on equitable
estoppel to compel arbitration was briefed and decided as a question of federal
common law. See A527-532 & n.4. As the district court correctly recognized,
however, the Supreme Court held in Arthur Andersen LLP v. Carlisle that equitable
estoppel analysis is governed not by federal common law, but by state law. See A527
n.4 (citing 556 U.S. at 630-31). Even though the district court identified a binding
Supreme Court precedent that forecloses their arguments, Defendants have adhered
to their original account of the applicable legal standard, which fails to take Arthur
Andersen into account. This Court should not follow Defendants’ lead. It should
instead apply state law, as required by Supreme Court precedent.
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The “relevant state contract law” for purposes of equitable estoppel is the state
law that governs the contract containing the arbitration clause. Arthur Andersen, 556
U.S. at 632. Because the ACN contracts include a North Carolina choice-of-law
provision, North Carolina law clearly applies. See A436 ¶ 18; A439 ¶ 18; A442 ¶
17; see also Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir. 1996). And in North Carolina,
equitable estoppel is appropriate only if the plaintiff “has asserted claims in the
underlying suit that, either literally or obliquely, assert a breach of duty created by
the contract containing the arbitration clause.” Smith Jamison Constr. v. APAC-Atl.,
Inc., 811 S.E.2d 635, 638 (N.C. Ct. App. 2018); accord Carter v. TD Ameritrade
Holding Corp., 721 S.E.2d 256, 263 (N.C. Ct. App. 2012). In other words, it is not
enough in North Carolina for a defendant to show that the contract “provides part of
the factual foundation” for the complaint. Smith Jamison Constr., 811 S.E.2d at 639.
Unless a plaintiff is “attempting to assert claims against [a nonsignatory defendant]
that are premised upon any contractual and fiduciary duties created by the contract
containing the arbitration clause,” equitable estoppel does not apply. Id. at 640.
This straightforward principle resolves this case. Plaintiffs assert no claims
against Defendants sounding in breach of contract or premised on breach of a duty
created by their contract with ACN. Rather, Plaintiffs’ claims “are dependent upon
legal duties imposed by [state] statutory or common law rather than contract law.”
Smith Jamison Constr., 811 S.E.2d at 640. Under North Carolina law, that simple
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fact is determinative. The district court’s denial of Defendants’ motion to compel
arbitration should therefore be affirmed on this ground.
b. Plaintiffs’ state law authority is properly before this Court.
While Defendants may object to any consideration of North Carolina law
because Plaintiffs “did not advance this argument in the [d]istrict [c]ourt,” Plaintiffs
may still “assert[] it as a basis on which to affirm that court’s judgment.” Schweiker
v. Hogan, 457 U.S. 569, 585 (1982). That is so because Plaintiffs are appellees
seeking affirmance of the decision below, and the “general rule [is] that the appellee
may seek to sustain a judgment on any grounds with support in the record.” Int’l Ore
& Fertilizer Corp. v. SGS Control Servs., Inc., 38 F.3d 1279, 1286 (2d Cir. 1994);
see also United States v. Morgan, 380 F.3d 698, 701 n.2 (2d Cir. 2004) (“[W]e are
entitled to affirm the judgment of the district court on any ground with support in
the record, even one raised for the first time on appeal.”). Moreover, this argument
is no great departure from the dispute below, since it merely identifies the controlling
law after the district court noted the issue on its own initiative.
To be sure, Defendants and ACN also advance arguments on appeal that were
not made below, and we identify doctrines of waiver and forfeiture that preclude
those arguments. See infra, 46-48, 75. But as appellants seeking to overturn the
district court’s judgments, Defendants are differently situated with respect to the law
of waiver and forfeiture. Compare 16AA Wright & Miller, Fed. Prac. & Proc. Juris.
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§ 3974.1 (4th ed. 2020) (“Unless an appellant’s argument was made in the district
court, it likely will not be considered for the first time on appeal.”) with id. § 3974.2
(“The appellee is also free to present arguments in support of the judgment below
by any reasoning from facts disclosed in the record, even though that reasoning was
rejected by the court below or was not even advanced below by the appellee.”). That
is particularly true here because Defendants affirmatively waived the new argument
they now seek to raise on appeal—and because they now seek to raise entirely new
bases for compelling arbitration on appeal, as compared to identifying new
contentions in support of bases advanced below. See infra, 46-48.
2. Defendants are not entitled to equitable estoppel under this Court’s precedents in any event
In the alternative, the district court’s decision should be affirmed under
Second Circuit cases governing equitable estoppel. Under this Court’s federal
common law standard, Defendants must show: (1) that there was a sufficiently close
relationship between them and ACN that Plaintiffs would have expected Defendants
to be able to arbitrate in ACN’s stead; and (2) that the claims against Defendants are
intertwined with the underlying contract. See Ragone v. Atl. Video at Manhattan
Ctr., 595 F.3d 115, 127 (2d Cir. 2010); Defts’ Br. at 17 (agreeing both are required).
These two requirements give force to “the black letter rule that the obligation to
arbitrate depends on consent.” Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d
354, 361 (2d Cir. 2008).
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a. Defendants lacked a sufficient relationship with ACN
Equitable estoppel cannot apply unless the “relationship among the parties . . .
justifies a conclusion that” the party resisting arbitration assumed “an obligation to
arbitrate” with the non-signatory seeking to compel arbitration. Sokol Holdings, 542
F.3d at 359. The district court concluded that this requirement was not satisfied here
because Defendants “did not reveal themselves as financially and professionally tied
[to ACN], much less associated in a way that would cause Plaintiffs reasonably to
predict that their contractual obligations to ACN would create the same obligations
with Defendants.” A531.
As an initial matter, the district court accurately identified the crucial facts
alleged in the Amended Complaint that make it clear why Defendants fail this test:
Defendants intentionally obscured their contractual and financial ties to ACN. See
supra, 9-10; A271-79. Indeed, the success of Defendants’ moneymaking scheme
depended on making sure their audience did not understand that they had business
relationships with ACN. Defendants’ deception on this point is one of the central
pillars of the Amended Complaint. A215, 258, 324-25. As the district court
explained, Defendants’ argument relies on the factual premise “that Plaintiffs knew
that ACN and Defendants were aligned,” but “the Amended Complaint alleges the
opposite.” A531. In that crucial respect, Defendants’ position on equitable estoppel
“turns the Amended Complaint on its head.” A531.
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The district court was right. The touchstone of the test is how Plaintiffs would
have understood the relationship between the signatory to the arbitration agreement
(ACN) and the non-signatories seeking to enforce it (Defendants). See Ross, 547
F.3d at 145-46 (test focuses on the “knowledge and consent” of the party resisting
arbitration and what was “reasonably seen” and “predictabl[e]” to them). In other
words, Defendants must show that their relationship to ACN as it was presented to
Plaintiffs was sufficient to put Plaintiffs on notice that a deal with ACN was
functionally a deal with them. Defendants concede this point. See Defts’ Br. at 18
(acknowledging that the test considers “the information available to [the] plaintiff”).
Defendants cannot prevail under this standard because Defendants repeatedly
misled Plaintiffs in this respect. There is no allegation in the Amended Complaint
that could possibly support an inference that Plaintiffs viewed ACN and Defendants
as interchangeable: they signed a contract with ACN, the terms of which specified
that it was only with ACN, and they had absolutely no reason to believe it was
somehow also with Defendants, who held themselves out as financially independent
of ACN.
Precedent confirms the point. When this Court has found a relationship
supporting equitable estoppel, “the plaintiffs themselves treated the signatory and
non-signatory corporate affiliates as at least somewhat interchangeable with respect
to the plaintiffs’ rights and responsibilities under the relevant contract.” Medidata
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Sols., Inc. v. Veeva Sys., Inc., 748 F. App’x 363, 366-67 (2d Cir. 2018) (emphasis in
original). Accordingly, nearly all of this Court’s cases have “involv[ed] affiliated
corporate entities” or non-signatories who were “explicitly named . . . as having
certain tasks to perform under the contract.” Ross, 547 F.3d at 145. There is nothing
like that here. There is no corporate or common-ownership relationship between any
of the Defendants and ACN, and Defendants do not contest the district court’s
conclusion that they were never agents acting under ACN’s control and direction.
See A533. And Defendants misrepresented even the arm’s-length dealings they did
have with ACN.
These facts are decisive. This Court has refused to compel arbitration where
the relationship at issue would have been unknown to plaintiffs when they entered
the contract. In Sokol Holdings, for example, this Court refused to compel arbitration
when plaintiffs entered into an agreement (with an arbitration clause) to buy a
business owner’s shares, then later sued a non-signatory that allegedly interfered
with the sale to take the shares itself. 542 F.3d at 357. Although the signatory seller
and the non-signatory purchaser entered into a “close corporate and operational
relationship” while interfering with the deal, the plaintiffs in Sokol Holdings did not
know about that relationship when they signed the agreement. Id. at 362. Similarly,
in Ross, plaintiffs signed credit card agreements (including arbitration clauses) with
various issuing banks, then later sued American Express, alleging that Amex had
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conspired with the banks and other credit card companies to set artificially high fees.
547 F.3d at 139-41. This Court again refused to compel arbitration, explaining that
Amex’s “only relation with respect to the cardholder agreements was as a third party
allegedly attempting to subvert the integrity of the cardholder agreements.” Id. at
146.7
Defendants’ arguments to the contrary lack merit. First, Defendants rely on
Ragone v. Atlantic Video at Manhattan Center, 595 F.3d 115. But that case only
underscores equitable estoppel’s central focus on foreseeability to the plaintiff. In
Ragone, the employment contract at issue did not explicitly mention the non-
signatory. 595 F.3d at 127. But the plaintiff “knew from the date of her
employment”—that is, when the contract was signed—that the non-signatory would
function as her “co-employer” with the company that hired her. Id. at 127-28. She
also knew that the non-signatory’s personnel would supervise her “in the ordinary
course of her daily duties” under the contract. Id. Thus, there was a clear
understanding that the non-signatory would be effectively “interchangeable” with
7 The equitable roots of the doctrine underscore why Defendants’ deception is inconsistent with estoppel here. It is a foundational principle of equity jurisprudence that parties should not reap the benefits of their own malfeasance. “[T]he equitable powers of this court can never be exerted in behalf of one who has acted fraudulently, or who by deceit or any unfair means has gained an advantage. To aid a party in such a case would make this court the abettor of iniquity.” PenneCom B.V. v. Merrill Lynch & Co., 372 F.3d 488, 493 (2d Cir. 2004) (quoting Bein v. Heath, 47 U.S. (6 How.) 228, 247 (1848)); accord Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 241 (1933) (“He who comes into equity must come with clean hands.”).
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the employer during the performance of her contract. See Medidata Sols., 748 F.
App’x at 366-67. In this way, Ragone is “consistent with the black letter rule that
the obligation to arbitrate depends on consent,” and “simply extend[ed] its contours
somewhat by establishing that the consent need not always be expressed in a formal
contract.” See Sokol Holdings, 542 F.3d at 361-62.8
Second, Defendants argue that Plaintiffs somehow should have understood
that Defendants were speaking “on behalf of ACN” because many of their statements
reached Plaintiffs through “ACN-branded events, DVDs, and magazines.” Defts’ Br.
22-23. But the fact that ACN decided to include some of Defendants’ endorsements
in its materials hardly put Plaintiffs on notice that Defendants and ACN were, behind
the scenes, so closely related that they were interchangeable counterparties to
Plaintiffs’ contract with ACN. This is especially true given that Defendants
themselves went to great lengths to repeatedly insist upon their own independence
from ACN, and given that the language of the contract between Plaintiffs and ACN
8 The district court cases that Defendants cite are similarly distinguishable. See Bankers Conseco Life Ins. Co. v. Feuer, No. 16 Civ. 7646, 2018 WL 1353279, at *7 (S.D.N.Y. Mar. 15, 2018) (non-signatories were four agents of the signatory company and another company they simultaneously represented); Cooper v. Ruane Cunniff & Goldfarb Inc., No. 16 Civ. 1900, 2017 WL 3524682, at *7 (S.D.N.Y. Aug. 15, 2017) (non-signatory and signatory were “co-fiduciaries” of the ERISA plan at issue); Fensterstock v. Educ. Fin. Partners, No. 08 Civ. 3622, 2012 WL 3930647, at *5 (S.D.N.Y. Aug. 30, 2012) (non-signatory “served as [the signatory’s] agent for the purposes of servicing [the plaintiff’s] loan,” and plaintiff “worked with” the non-signatory throughout his loan repayment).
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expressly limited the agreement to just the contracting parties. A436 ¶¶ 3, 16; A439
¶¶ 3, 16; A442 ¶¶ 3, 17. At the very least, Defendants’ argument requires a giant
inferential leap in Defendants’ favor from the facts alleged in the Amended
Complaint. And at this stage of the proceedings, the Court must resolve all
reasonable inferences in favor of the non-movant. See, e.g., Meyer v. Uber Techs.,
Inc., 868 F.3d 66, 74 (2d Cir. 2017); Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d
Cir. 2003).
Finally, even taking the facts exactly as Defendants characterize them (prior
to the completion of discovery and without a single document from ACN),
Defendants’ argument still fails as a matter of law. Defendants have conceded the
lack of any agency relationship with ACN by not challenging the district court’s
decision against them on that point. See A532-33. So even on their own account of
the facts, any statements they made “on behalf of” ACN would have been made in a
transactional, arm’s-length capacity: as a provider of discrete services to ACN, not
as an agent or corporate affiliate of ACN. See, e.g., A272 (“[H]e was paid lavishly
for each appearance—at times millions of dollars for delivering a single speech.”).
This Court has never found a sufficient relationship for equitable estoppel purposes
where the signatory and non-signatory had engaged only in an arm’s-length
transaction. See Ross, 547 F.3d at 144-46 (surveying the cases); Medidata Sols., 748
F. App’x at 366-67 (focusing on whether the signatory and non-signatory were “at
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least somewhat interchangeable with respect to the plaintiffs’ rights and
responsibilities under the relevant contract”).9
b. The claims against Defendants are not intertwined with ACN’s contract
Defendants’ motion to compel arbitration also lacks merit because Plaintiffs’
claims are not intertwined with the agreements containing the arbitration clause.
While the district court concluded otherwise, it gave the issue only brief
consideration in light of its separate conclusion that the necessary relationship for
equitable estoppel was lacking. A528. And, in fact, the lack of intertwinedness
provides an additional basis on which the district court can be affirmed. While
Defendants’ fraud may have induced plaintiffs to enter into a relationship with ACN,
the illegality of Defendants’ conduct did not in any way arise from the particular
contract ACN had its IBOs sign—which simply set forth obligations that IBOs and
ACN owed to one another, and did not assign any duties to third parties. See A436
¶¶ 3, 13; A439 ¶¶ 3, 13; A442 ¶¶ 3, 13. Nor was Defendants’ illegal conduct geared
9 In Ragone, the fact that the signatory was, formally, “a client” of the non-signatory defendant was insufficient to establish the requisite relationship. 595 F.3d at 118. Ragone emphasized the additional, dispositive fact (absent here) that the plaintiff “kn[ew] that she would extensively treat with [the defendant’s] personnel” when she signed her employment contract. Id. at 128. Ragone is the high-water mark of this Court’s equitable estoppel precedents, and even on Defendants’ own version of the facts it does not warrant the application of equitable estoppel here.
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toward determining any of the terms of that agreement. Yet those are the only
circumstances in which the Court has found intertwinedness.
Any intertwinedness found in this Court’s prior cases has fallen into two
categories. First, there are cases where the contract itself gave rise to the challenged
conduct. Most such cases concerned claims that either required proving a breach of
the relevant agreement, see, e.g., Sokol Holdings, 542 F.3d at 359; AstraOil Co. v.
Rover Navigation, Ltd., 344 F.3d 276, 281 (2d Cir. 2003), or otherwise involved
“construing . . . provisions of” the contract, Choctaw Generation Ltd. P’ship v. Am.
Home Assur. Co., 271 F.3d 403, 406-07 (2d Cir. 2001). Ragone, in turn, found that
workplace harassment claims were intertwined with a contract that “required [the
plaintiff] to follow the instructions and directives” of the alleged harassers. 595 F.3d
at 127. Those claims, too, arose out of the terms of the contract—the challenged
behavior was “factually intertwined” with duties imposed by the agreement. Id. at
128.
A second line of cases involved suits in which the defendant was accused of
tampering with the contract by causing illegal terms to be included in it. The claims
found to be intertwined were price-fixing schemes that injected artificially inflated
price terms into the contracts containing arbitration clauses. See Ross, 547 F.3d at
139, 146; JLM Indus. v. Stolt-Nielsen SA, 387 F.3d 163, 173, 176, 178 (2d Cir. 2004).
In these cases, even if the alleged illegal conduct could be understood to have
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preceded the formation the contract, it was nevertheless fundamentally “bound up
with” and “linked textually to” the contract itself. JLM Indus., 387 F.3d at 178
(quoting Choctaw, 271 F.3d at 407).
This case is not analogous. The duty Defendants breached in making
fraudulent statements to Plaintiffs is imposed by common law and statutes, and it
exists to protect the public at large from dishonest operators. Nothing about that
illegality depends on construing any terms of any contract. And Plaintiffs do not
allege that Defendants’ fraud aimed to dictate or corrupt any terms of the IBO
agreements. To the contrary, Plaintiffs have alleged that Defendants did not closely
scrutinize ACN’s business model. So long as they made their millions in a side deal
with ACN, they did not care what transpired between ACN and Plaintiffs.
To be sure, Plaintiffs allege that Defendants’ fraudulent statements induced
them to go into business with ACN. See Defts’ Br. at 18; see also ACN Br. at 29,
52-53. But this Court has never held that intertwinedness exists simply because the
alleged illegal conduct affected the existence or non-existence of the agreement,
even if the actual terms of the agreement are not implicated. Nor would it make any
sense to extend the doctrine to cover these facts. As many courts have recognized,
such claims are not intertwined with a contract in any way that would support
estoppel. See supra, 24-26; see also White v. Sunoco, Inc., 870 F.3d 257, 265 (3d
Cir. 2017) (Florida and South Dakota law) (equitable estoppel did not apply where
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the plaintiff’s claims “do not rely on any terms in the [contract containing the
arbitration clause]”); Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1132 (9th Cir.
2013) (California law) (equitable estoppel did not apply to fraudulent inducement
claims because to hold otherwise would “erroneously equate[] . . . the existence of
[a contract] with interrelatedness between [p]laintiffs’ claims and the obligations” it
imposes).
Defendants separately argue that the claims are intertwined because—in their
understanding—the relief Plaintiffs seek is “recovery of funds they invested with
ACN” and to “set aside their contract[]” with ACN. Defts’ Br. at 18, 20; accord
ACN Br. at 27-28, 52. That is simply incorrect. In terms of ACN, what is done is
done. Plaintiffs seek no damages from them, and do not seek to undo their contract.
It is true that some component of Plaintiffs’ damages claims against Defendants
could be measured by looking to the amount they were induced to pay ACN. But
any recovery will come from Defendants and have nothing to do with unwinding
any contract. The case Defendants hypothesize to support their position is not one
that is before this Court.
3. Defendants’ reliance on Grigson is misplaced
Unable to satisfy either the governing test (North Carolina) or the test applied
below (federal common law), Defendants argue that the “ultimate question” is really
“whether it is fair to extend” Plaintiffs’ arbitration agreement with ACN. Defts’ Br.
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at 23 (“The linchpin for equitable estoppel is equity—fairness.”). Yet abstract
notions of fairness are no substitute for an actual legal standard, nor can they justify
Defendants’ attempt to circumvent “the basic principle that one does not give up
one’s right to court adjudication except by consent.” Sokol Holdings, 542 F.3d at
361; see also Holland v. Florida, 560 U.S. 631, 649 (2010) (“[C]ourts of ‘equity
must be governed by rules and precedents no less than the courts of law.’”). And it
would not be “fair” to extend ACN’s contractual rights to Defendants, who
prevented Plaintiffs from knowingly consenting to any such arrangement by
deliberately concealing their extensive, profitable ties to ACN as part of a fraudulent
scheme.
It is telling that in making this argument, Defendants rely so heavily on the
Fifth Circuit’s decision in Grigson v. Creative Artists Agency, LLC, 210 F.3d 524
(5th Cir. 2000). See Defts’ Br. 23-25. Grigson’s reasoning was squarely at odds with
this Court’s consent-focused approach to equitable estoppel, as the dissent in
Grigson pointed out. See 210 F.3d at 537 (Dennis, J., dissenting) (arguing that the
majority should have followed Second Circuit authority, which would have
compelled a different result); Sokol Holdings, 542 F.3d at 361 (endorsing the
reasoning of the Grigson dissent).10 And the facts in Grigson differed markedly from
10 In particular, this Court’s precedents would not permit equitable estoppel on the sole basis that a non-signatory and a signatory engaged in “interdependent and concerted misconduct.” Compare Grigson, 210 F.3d at 527 (stating that equitable
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the facts here. In Grigson, the claims against the non-signatory defendant relied
extensively on alleged violations of the contract with the signatory, violations that
the non-signatories supposedly induced. 210 F.3d at 528-30. Here, Plaintiffs do not
contend that ACN breached the IBO agreement, nor do they allege that Defendants
violated any duties imposed by that agreement (or encouraged ACN to do so). That
difference alone is dispositive. See supra, 24-26.
Moreover, Grigson is unpersuasive on its own terms—particularly because it
pre-dated the Supreme Court’s guidance in Stolt-Nielsen S.A. v. AnimalFeeds
International Corp., 559 U.S. 662 (2010). Stolt-Nielsen held that the “contractual
nature of arbitration” includes allowing parties to “specify with whom they choose
to arbitrate their disputes” and that lower courts “must not lose sight of the purpose
of the exercise: to give effect to the intent of the parties.” Id. at 683-84. Stolt-Nielsen
thus vindicated the logic of the Grigson dissent and this Court’s own precedents.
Finally, Defendants rely on dicta in Grigson describing that litigation as an
“attempt to bypass” an arbitration clause. Defts’ Br. at 23-24 (quoting Grigson, 210
F3d at 530). But the facts Grigson described are not present here. In Grigson, the
estoppel was permissible based solely on that basis), and Defts’ Br at 26 n.2 (relying on this aspect of Grigson), with Moss v. BMO Harris Bank, N.A., 24 F. Supp. 3d 281, 288 n.8 (E.D.N.Y. 2014) (Bianco, J.) (noting that this Court’s consent-focused estoppel precedents are in tension with a “substantially interdependent and concerted misconduct” standard).
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plaintiff sued the signatory for breach of contract in state court; voluntarily dismissed
when the signatory moved to compel arbitration; and then filed a nearly identical
lawsuit against non-signatories in federal court, alleging that the non-signatories had
“caused” the same breaches of contract that were at issue in the abandoned state-
court litigation. Id. at 530. Nothing even remotely similar occurred here. Plaintiffs
do not contend that ACN violated the IBO agreement and do not seek any relief from
ACN, nor have they ever done so previously. This lawsuit seeks to hold Defendants
accountable for their own fraudulent conduct. As the district court emphasized:
“[P]laintiffs are entitled to sue whomever they want; and they are not compelled to
sue parties who . . . they don’t want to sue.” A555.
B. Defendants waived any right to compel arbitration
Separate from its equitable estoppel ruling, the district court concluded that
Defendants waived any right to compel arbitration. This finding should also be
affirmed.
After Plaintiffs filed suit, and despite full awareness of the arbitration clause
on which they now seek to rely, Defendants chose to aggressively litigate to see what
benefits they could obtain from the Article III forum. They twice moved to dismiss
under the Federal Rules of Civil Procedure. A16, 18. The second time, they
succeeded in obtaining full dismissal of Plaintiffs’ federal claims on the merits.
A399-424. And while in federal court, Defendants actively litigated procedural
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issues—and availed themselves of intrusive discovery procedures that would have
been unavailable in arbitration, serving numerous non-party subpoenas on plaintiffs’
friends and family. SA59, 166. Only after the district court partly denied their motion
to dismiss did Defendants seek an order requiring arbitration. Indeed, Defendants
informed the district court while it was considering their motion to dismiss that they
would move to compel arbitration only if it did not dismiss the case.
As the district court properly held, this gamesmanship resulted in waiver of
any asserted right to compel arbitration. Courts assess waiver by weighing the
resulting prejudice to the non-moving party against the moving party’s justification
(or lack thereof) for its delay. See Kramer v. Hammond, 943 F.2d 176, 179-80 (2d
Cir. 1991). Three factors guide the analysis: “(1) the time elapsed from when
litigation was commenced until the request for arbitration; (2) the amount of
litigation to date, including motion practice and discovery; and (3) proof of
prejudice.” La. Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith
Inc., 626 F.3d 156, 159 (2d Cir. 2010). Those factors counsel in favor of affirmance
here.
To start, significant time elapsed before Defendants filed their motion.
Defendants did not request arbitration until July 2019—over eight months after this
case began. See Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d
20, 26 (2d Cir. 1995) (finding waiver after a delay of seven months); PPG Indus.,
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Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 108 (2d Cir. 1997) (five months).
They waited that long despite having mentioned the arbitration clause in their very
first sentence of argument in the district court. See SA58. And by then, a
considerable amount of litigation had occurred, much of it at Defendants’ behest.
The parties had fully briefed, and the district court had resolved, Plaintiffs’ motion
to proceed pseudonymously, Defendants’ motion to stay discovery, and Defendants’
(second) Rule 12(b)(6) motion, which sought dismissal of the very claims
Defendants now contend should always have been in arbitration. See La. Stadium,
626 F.3d at 159 (finding waiver after eleven months of litigation, including briefing
of three non-dispositive motions and partial briefing of a Rule 12(c) motion). All
this occurred while Defendants were “fully aware of [their] alleged right to compel
arbitration.” See Cotton v. Slone, 4 F.3d 176, 179 (2d Cir. 1993)
This delay, moreover, was unabashedly tactical. Defendants first asked the
district court to dismiss Plaintiffs’ claims. They then waited just long enough for the
district court to rule on that request—and to dismiss Plaintiffs’ federal claims—
before immediately insisting that the district court had no role to play and the whole
case had to be sent to arbitration. Defendants were notably candid about this tactic
in their letter informing Plaintiffs that they planned an about-face: There, Defendants
said they would move to compel arbitration “in the event the Court denies the
pending motion to dismiss.” SA16 (emphasis added). As the district court explained,
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once Defendants “extracted what they [could] from the judicial proceedings, they
[sought] to move to a different forum.” A536.
This “heads-I-win, tails-we-arbitrate” position is precisely the kind of
prejudicial tactic that justifies denying a motion to compel arbitration. “[A] litigant
is not entitled to use arbitration as a means of aborting a suit that did not proceed as
planned in the District Court.” La. Stadium, 626 F.3d at 161; see Hammond, 943
F.2d at 179; PPG Indus., 128 F.3d at 107. Here, the district court—which was
already well acquainted with the parties—explained that Defendants’ use of this
gambit weighed heavily in its calculus. Had defendants not remained silent about
their supposed right to arbitrate “over many months of litigation,” the district court
“would have directed Defendants to file the motion to compel arbitration first and
decided the appropriate forum before making any decision on the merits.” A536.
Yet there is more. Plaintiffs suffered further prejudice because Defendants
used their sojourn in the Article III system to deploy invasive discovery on Plaintiffs’
friends and family that would have been unavailable in arbitration. See Cotton, 4
F.3d at 179 (noting that “[s]ufficient prejudice to infer waiver has been found when
a party seeking to compel arbitration engages in discovery procedures not available
in arbitration”). And that is to say nothing of the additional delay and expense that
Plaintiffs incurred from briefing procedural issues and the motion to dismiss, and in
amending their complaint. See Hammond, 943 F.2d at 179 (prejudice “can be found
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when a party too long postpones his invocation of his contractual right to arbitration,
and thereby causes his adversary to incur unnecessary delay or expense”).
In assessing this record, the Court may consider Defendants’ lack of any
sound justification for their delay. Defendants now claim they needed “guidance
from the court about how to proceed” in light of Plaintiffs’ pseudonymity. See Defts’
Br. 31. But they waited eight months to seek that guidance, see SA14, even as they
told the district court they did not intend to move to compel arbitration, see SA58-
59. And they did not mention any such need for guidance below when asked to
identify what prejudice they would suffer from allowing Plaintiffs to proceed under
pseudonyms. See D. Ct. ECF No. 46 at 18-20. Their new explanation is obviously
pretextual: only have-it-both-ways tactics can explain the delay here. See Leadertex,
Inc., 67 F.3d at 26 (affirming finding of waiver where movant’s “proffered excuse
for the delay . . . is somewhat disingenuous,” such that the court was “firmly
persuaded that [the movant’s] actions were inconsistent with its right to compel
arbitration”); La. Stadium, 626 F.3d at 160-61 (rejecting movant’s argument against
waiver as “unsympathetic” after assessing in detail its proffered excuses for delay
and rejecting each of them as insufficient).
Finally, it matters that Defendants are asserting an entitlement to invoke an
arbitration clause to which they were not a party. The fact that Defendants delayed
in seeking an equitable remedy—and did so without any valid justification, but with
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prejudice to Plaintiffs and disrespect to the Article III forum—weighs in favor of
affirmance. See, e.g., Parker v. Dacres, 130 U.S. 43, 50 (1889) (noting “the principle
upon which courts of equity uniformly proceed, independently of any statute of
limitations, of refusing relief to those who unreasonably delay to invoke their aid”).
In response to all this, Defendants cite cases from this Court and others, none
of which involved a non-signatory, where claims of waiver were rejected on
materially different facts than those presented here. See Defts’ Br. at 28-29. But
“[t]he waiver determination necessarily depends upon the facts of the particular case
and is not susceptible to bright line rules.” Cotton, 4 F.3d at 179; accord Thyssen,
Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002). Defendants’
arguments are plainly unresponsive to the record of prejudicial, tactical delay here.
See Thyssen, 310 F.3d at 105 (“The key to a waiver analysis is prejudice.”).
C. The district court was correct to resolve these issues itself
For the reasons given above, the district court properly denied Defendants’
motion to compel arbitration. On appeal, Defendants try a new argument: that an
arbitrator—not the district court—should have decided whether they may compel
arbitration of Plaintiffs’ claims through equitable estoppel in the first instance. This
position, however, is both waived and meritless.
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1. Defendants waived their new arbitrability position by arguing the opposite to the district court
Defendants argue for the first time on appeal that they were entitled to have
an arbitrator, not the district court, decide whether Plaintiffs’ claims against them
should be arbitrated. This is a 180-degree turnaround from the position Defendants
took below. It was Defendants themselves who asked the district court to determine
whether the remaining state-law claims against them must be arbitrated. The first
sentence of their brief below asked for “an order compelling Plaintiffs to arbitrate
the state law claims that survived Defendants’ motion to dismiss.” SA29. And their
briefing concluded by asking the district court “to order Plaintiffs to arbitrate their
state law claims with Defendants.” SA92-93; see also, e.g., SA36. As the record
demonstrates, Defendants began challenging the district court’s authority to decide
these issues only after the district court decided the issues against them.
In briefing their motion for a stay of the proceedings below, Defendants
asserted that they made this arbitrability argument in the district court, which
somehow overlooked it. See ECF No. 120 at 2 (citing SA37). That is incorrect. To
be sure, the lone page of briefing that Defendants cited to support this claim
mentioned the presence of a delegation provision. But Defendants did not argue that
the delegation provision applied to any of the issues before the court, nor did they
advance any argument resembling the one they have raised on appeal. See SA37. If
anything, their discussion of the delegation provision below confirms their
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awareness that a delegation argument was potentially available to them—and
highlights their choice to instead ask the district court to decide these questions
instead.
Because Defendants made a strategic choice not to invoke the delegation
provision in the district court, their new arbitrability position is not available to them
on appeal. This Court “will infer a waiver . . . where the parties were aware of their
rights and made the conscious choice, for whatever reason, to waive them.” Mooney
v. City of New York, 219 F.3d 123, 131 (2d Cir. 2000). The effect of such knowing
and intentional waivers “is that there was no error” in the district court. Am. Home
Assurance Co. v. A.P. MollerMaersk A/S, 609 F. App’x 662, 664 (2d Cir. 2015).
Applied here, these precedents demonstrate that Defendants irrevocably waived their
arbitrability arguments by asking the district court to decide the very issues that they
now say must be decided solely by an arbitrator. See Stern v. Marshall, 564 U.S.
462, 482 (2011) (“Pierce repeatedly stated to the Bankruptcy Court that he was
happy to litigate there. We will not consider his claim to the contrary, now that he is
sad.”); Royce v. Michael R. Needle P.C., 950 F.3d 939, 950 (7th Cir. 2020) (by
asking the district court to resolve a potentially arbitrable issue, appellant effected a
“waiver of the right to arbitrate” that “slams the door shut on any assertion that he
can invoke it” for the first time on appeal).
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Even if Defendants’ failure to make this argument below could be understood
as an inadvertent forfeiture rather than a knowing and intentional waiver, the result
would be the same. See Adams v. Suozzi, 433 F.3d 220, 222 n.1 (2d Cir. 2005)
(declining to consider an argument not raised below in support of a motion to compel
arbitration); see also Hamer v. Neighborhood Hous. Servs. of Chicago, 138 S. Ct.
13, 17 n.1 (2017). Defendants lack any credible justification for their failure to make
these arguments to the district court, which is reason enough to hold a party to a
forfeiture. See Patterson v. Balsamico, 440 F.3d 104, 112-13 (2d Cir. 2006); Allianz
Ins. Co. v. Lerner, 416 F.3d 109, 114 (2d Cir. 2005). That remains true in the
arbitration context. See Adams, 433 F.3d at 222 n.1. Defendants therefore cannot
pursue their arbitrability theory for the very first time on appeal.
2. Defendants’ new arbitrability position is meritless
Regardless, Defendants’ arbitrability arguments lack merit. Defendants assert
that the issues implicated by their motion to compel arbitration are “gateway
questions” concerning the broader dispute’s “arbitrability,” and that they are entitled
to have any such questions that arise between them and Plaintiffs referred to an
arbitrator. In making this argument, Defendants rely on a delegation provision in the
contract between Plaintiffs and ACN. But this argument rests on two errors: first,
the issue here goes to contract formation and cannot be delegated; and second,
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Defendants come nowhere close to showing that Plaintiffs consented to arbitrate
arbitrability with them. Each error independently forecloses Defendants’ position.
a. Equitable estoppel is a non-delegable question of contract formation
First and foremost, Defendants’ argument fails because the equitable estoppel
inquiry necessarily involves a question of contract formation. And “parties may not
delegate to the arbitrator the fundamental question of whether they formed the
agreement to arbitrate in the first place.” Doctor’s Assocs. v. Alemayehu, 934 F.3d
245, 251 (2d Cir. 2019) (discussing Granite Rock Co. v. Int’l Bhd. of Teamsters, 561
U.S. 287, 299-301 (2010)).
Equitable estoppel is the only ground on which Defendants purport to have
any agreement with Plaintiffs. And this Court’s cases confirm that whether equitable
estoppel applies is a question of contract formation. That is true in a decidedly literal
sense. After all, a finding of equitable estoppel is premised on the conclusion that
“an agreement implied in fact” exists between the parties, Sokol Holdings, 542 F.3d
at 361 (quoting Grigson, 210 F.3d at 533 (Dennis, J., dissenting)), while the absence
of equitable estoppel means that “the requisite contractual basis for arbitration does
not exist,” Ross, 547 F.3d at 143.
Because equitable estoppel goes to the threshold question whether a contract
has been formed between two parties, it cannot be delegated to an arbitrator to
decide. Doctor’s Assocs., 934 F.3d at 251; Meena Enters. v. Mail Boxes Etc., No. 12
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Civ. 1360, 2012 WL 4863695, at *3 n.4 (D. Md. Oct. 11, 2012) (“[T]hreshold issues
of contract formation—including equitable estoppel—are properly subject to
judicial determination.”). As the Eleventh Circuit recently asked in an opinion by
Judge O’Scannlain, “[H]ow does one go about delegating the question of equitable
estoppel? By definition, there is no contract, which is, after all, why one of the parties
is demanding equitable estoppel.” Lavigne v. Herbalife, Ltd., 967 F.3d 1110, 1120
n.7 (11th Cir. 2020).
In fact, Lavigne asked that question in a case just like this. There, the plaintiffs
were independent business owners (“distributors”) who—like Plaintiffs here—lost
money after participating in a multi-level marketing arrangement (“direct sales
network”) offered by a company called Herbalife. Id. at 1113-14. Those plaintiffs
sued third parties who—just like Defendants here—allegedly had made “misleading
and fraudulent income claims” to induce them to pay money to Herbalife. Id. at 1115.
The defendants tried to invoke Herbalife’s arbitration provision, which incorporated
the same AAA rules at issue here, even though they—just like Defendants here—
were not signatories. Id. at 1115-16. The Eleventh Circuit refused to compel
arbitration. Id. at 1117-20. It explained that the FAA “requires a court to send
threshold questions of arbitrability to an arbitrator only when the parties have agreed
to do so,” and absent a written contract between the plaintiffs and the non-signatory
defendants, the plaintiffs “ha[d] not agreed to anything with” defendants. Id. at 1118.
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Defendants resist that interpretation, arguing that the Second Circuit has
treated “the question whether nonsignatories . . . may enforce an arbitration
agreement” as a “question of arbitrability” that can be delegated to an arbitrator.
Defts’ Br. at 14. To support this claim, Defendants cite Contec Corp. v. Remote
Solution, Co., Ltd., 398 F.3d 205, 208-11 (2d Cir. 2005).11 But Contec held only that
the question of whether already-established contractual rights had been “validly
assigned” from a signatory to its corporate successor was a matter of “continued
‘existence, scope, or validity’” that could be delegated to an arbitrator. 398 F.3d at
210 (emphasis added). As other courts have correctly observed, Contec did not
address whether a claim of equitable estoppel not based on an assignment of already-
established contractual rights is a question of arbitrability similarly delegable to an
arbitrator. See In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales
Practices, & Prods. Liab. Litig., 838 F. Supp. 2d 967, 986 (C.D. Cal. 2012)
(“Contec does not support the broad proposition that in the face of a delegation
provision, the Court should defer to the arbitrator entirely and make no inquiry into
11 Defendants also cite Thai-Lao Lignite (Thailand) Co. Ltd. v. Government of Laos, 492 F. App’x 150 (2d Cir. 2012), as a case where a “third-party enforcement issue” was arbitrated. Defts’ Br. at 14-15. But there, the question was whether an arbitrator had properly exercised jurisdiction over a non-signatory “third-party beneficiar[y],” where the third party had arbitrated alongside the signatory and its “presence in the arbitration was not shown to disadvantage the [party opposing arbitration] in any way.” 492 F. App’x at 151-52.
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whether a non-signatory may pursuant to equitable estoppel enforce an agreement to
arbitrate against a signatory.”).12
b. Even if equitable estoppel is delegable, Plaintiffs did not consent to arbitrate arbitrability with Defendants
i. Defendants have not shown a clear and unmistakable agreement with Plaintiffs to arbitrate threshold questions
Alternatively, even if equitable estoppel could be delegated under certain
circumstances, Defendants have not shown that those circumstances exist here. In
seeking to make that showing, Defendants rest on a single premise: that the law sets
a “lower bar[]” to establish an agreement to arbitrate gateway questions of
arbitrability than it does to establish an agreement to arbitrate. Defts’ Br. at 15; see
also id. (arguing a nonsignatory can arbitrate arbitrability even if it has “a markedly
weaker relationship than necessary . . . to actually force arbitration of the underlying
dispute”). But this premise gets things exactly backwards. It is hornbook law under
the FAA that establishing an agreement to arbitrate arbitrability under the FAA
requires more exacting proof—not less proof—than other types of arbitration
agreements.
12 If anything, Contec actually underscores the point that contract formation is an essential prerequisite before any issues can be delegated to an arbitrator. As discussed at greater length below, before considering whether the assignment issue was delegable, Contec conducted a separate analysis to ensure there was sufficient agreement between the parties. See 398 F.3d at 209.
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“Under the FAA, threshold questions of arbitrability presumptively should be
resolved by the court and not referred to the arbitrator.” Doctor’s Assocs., 934 F.3d
at 250. Contrary to Defendants’ position, there is a robust presumption against
arbitrating arbitrability, which can be overcome only where “the parties ‘clearly and
unmistakably’ agree to arbitrate threshold questions.” Id. at 251; accord Henry
Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 530 (2019); First Options
of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). “In this manner the law treats
silence or ambiguity about the question ‘who (primarily) should decide arbitrability’
differently from the way it treats silence or ambiguity about the question ‘whether a
particular merits-related dispute is arbitrable because it is within the scope of a valid
arbitration agreement’ . . . .” First Options, 514 U.S. at 944-45. Ambiguous or
equivocal consent to arbitrate the first question (who decides) is never sufficient
under the FAA to delegate issues of arbitrability.
For essentially the same reasons that Defendants have failed to show that
Plaintiffs agreed to arbitrate the merits of this case with them, see supra, 23-40,
Defendants have also failed to show a clear and unmistakable agreement by
Plaintiffs to arbitrate gateway issues of arbitrability.
In their attempt to overcome these principles, Defendants rely on the terms of
Plaintiffs’ contracts with ACN. See Defts’ Br. at 14. Principally, they rely on a
provision in the arbitration clause that incorporates by reference the AAA’s
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Commercial Rules of Arbitration, which provide that an arbitrator has “the power to
rule on his or her own jurisdiction.” Id. at 13 (quoting AAA Rule 7(a)). Defendants
contend this operates as a “delegation provision,” Rent-A-Ctr., W., Inc. v. Jackson,
561 U.S. 63, 68 (2010), and cite it as proof of a clear and unambiguous agreement
by Plaintiffs to arbitrate arbitrability with them.
This argument does not succeed. The delegation provision appears in a
bilateral contract between Plaintiffs and ACN. It addresses who should resolve
disputes that arise between the signatories to the contract (namely, Plaintiffs and
ACN). This provision, without more, cannot possibly be taken as proof that Plaintiffs
(or any other signatory) intended to arbitrate arbitrability with strangers to the
contract—much less that any such intent was clear and unmistakable. See Republic
of Iraq v. BNP Paribas USA, 472 F. App’x 11, 12-13 (2d Cir. 2012); Lavigne, 967
F.3d at 1118; Kramer, 705 F.3d at 1127. Indeed, the agreement between Plaintiffs
and ACN expressly states, “In the event of a dispute between me and ACN . . . it is
agreed that such disputes shall be exclusively resolved through binding arbitration
[under the AAA rules].” A435 ¶ 16 (emphasis added); A439 ¶ 16; see also A442
¶ 17. Given this limitation, it makes no sense to read the delegation provision as clear
and unmistakable proof that Plaintiffs—in signing the contract—agreed to arbitrate
arbitrability (or anything else) with Defendants.
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This Court has already refused to enforce a delegation clause on a similar basis
in Republic of Iraq. There, two parties agreed that disputes related to their contract
must be “referred by either Party” for arbitration under arbitral rules that included
language delegating questions of arbitrability to the arbitrator. 472 F. App’x at 12-
13. A non-party to the contract sought to invoke the arbitration clause, including its
delegation provision. Id. at 12. This Court held that the non-signatory could not do
so, since there was no “clear and unmistakable evidence that the particular question
of arbitrability at issue here—whether [the non-party] may invoke the arbitration
clause as a third-party beneficiary of the contract—should be decided by arbitrators.”
Id. at 13. The Court explained: “Where, as here, the arbitration clause does not
clearly vest any right to invoke arbitration in a non-party . . . , a fortiori, it does not
afford [the non-party] the right to have arbitrators rather than a court determine the
arbitrability of its dispute.” Id.
The Ninth Circuit reached the same conclusion in a case materially
indistinguishable from this one. In Kramer, the defendant—a non-signatory to an
arbitration agreement between plaintiff car buyers and third-party car dealerships—
sought to compel arbitration of the question whether it was entitled to equitable
estoppel. 705 F.3d at 1125-26. Much like here, the arbitration clause by its terms
applied only to claims between the signatories. Id. at 1127. The Ninth Circuit
therefore declined to send the equitable estoppel issue to an arbitrator, even though
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the plaintiffs’ contract elsewhere included a delegation provision, because “Plaintiffs
only agreed to arbitrate arbitrability—or any other dispute—with the [other
signatories].” Id. at 1128. As the Ninth Circuit explained, “[i]n the absence of a
disagreement between Plaintiffs and the [other signatories], the agreement to
arbitrate arbitrability does not apply.” Id.
ii. Contec does not support Defendants’ position
Defendants again rely heavily on Contec Corp. v. Remote Solution. This time,
they cite it for the supposed proposition that the Second Circuit applies a “markedly
weaker” standard than the standard equitable estoppel test to determine when a non-
signatory may enforce a delegation clause. Defts’ Br. at 15. Here, too, Defendants
misread Contec, which simply illustrates the principle set forth above: enforcement
of a delegation clause by a non-signatory requires clear and unmistakable evidence
of consent to arbitrate with the non-signatory, and that evidence must be more than
the mere existence of a delegation provision agreed to by the signatories. In other
words, not only does Contec require there to be evidence of an agreement to arbitrate
with the non-signatory, but it confirms that any attempt to invoke a delegation
provision requires that agreement to be clear and unmistakable.13
13 Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011), on which Defendants also rely, further underscores the point. Applying Contec, this Court in Republic of Ecuador compelled arbitration of arbitrability issues only after
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The facts of Contec bear this out. In that case, Contec L.P. had entered into an
arbitration agreement with Remote Solution. This agreement included a delegation
provision. Contec L.P. subsequently went through changes in corporate form, while
retaining the same owner, address, and name (“Contec”). In one of its successor
forms, Contec then sought to enforce Contect L.P.’s arbitration agreement with
Remote Solution—and, in so doing, described the question whether the assignment
of rights was valid as a question of arbitrability for the arbitrator to decide.
This Court agreed that this question was appropriately one for the arbitrator
to decide. But at the same time, the Court emphasized “that just because a signatory
has agreed to arbitrate issues of arbitrability with another party does not mean that
it must arbitrate with any non-signatory.” Contec, 398 F.3d at 209. The Court then
explained that more is needed to satisfy the “threshold determination” required by
First Options, 514 U.S. at 944-45—in other words, to provide “‘clea[r] and
unmistakabl[e]’ evidence” of an agreement between the parties. Id. at 944
(alterations in original). Contec suggested that the “factors laid out in” this Court’s
equitable estoppel cases could provide a “useful benchmark” for how a non-
signatory might make that showing. 398 F.3d at 209.
confirming that both parties had manifested “clear and unmistakable” consent to arbitrate questions of arbitrability with one another. Id. at 394-95.
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In its analysis, however, Contec relied on facts going well beyond those
necessary to establish equitable estoppel. In particular, it considered three factors,
which combined to “demonstrate that a sufficient relationship existed” under First
Options. Id. Although one factor was Remote Solution’s status as a signatory, that
was not enough. Id. The Court also relied on (1) the “undisputed relationship
between each corporate form of Contec and Remote Solution,”; and (2) the fact that
the parties “apparently continued to conduct themselves as subject to the
[agreement] regardless of change in corporate form.” Id. In other words, it was
essential to the Court’s decision that both Remote Solution and the non-signatory
successor form of Contec manifested—through their conduct—clear consent to be
bound by the delegation provision.14 Cf. First Options, 514 U.S. at 946 (also looking
to the conduct of the parties to assess whether they “clearly agreed” to arbitrate
arbitrability).
The facts here are nothing like those in Contec. Defendants have no
relationship with Plaintiffs, apart from having defrauded them. Plaintiffs have never
conducted themselves as though Defendants are part of their agreement with ACN.
14 Contec separately held that the dispute over whether Contec could “validly assign[]” its rights to the successor corporation was a question of the original contract’s “continued ‘existence, scope or validity’” and therefore could be decided by the arbitrator under the AAA rules. Contec, 398 F.3d at 210. That holding is not relevant here, because Defendants have not argued that ACN assigned its arbitral rights to them. But see Defts’ Br. at 14 (relying on this discussion).
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They have never treated Defendants and ACN as interchangeable—or as agents or
assigns or successors or anything like that. And Defendants themselves did not act
that way until eight months into this litigation, when they strategically claimed to be
part of the agreement despite knowing of its existence from the very outset and never
previously making that claim. More fundamentally, however, for all the reasons
given above, Defendants cannot establish the kind of relationship that would trigger
equitable estoppel (which is the bare minimum under Contec). The circumstances
here thus do not support a conclusion—let alone a clear and unmistakable
conclusion—that Plaintiffs implicitly agreed to arbitrate anything with Defendants
when they signed a contract with ACN, much less critical threshold questions of
arbitrability.
II. THE DISTRICT COURT CORRECTLY DENIED ACN’S CROSS-MOTION TO COMPEL ARBITRATION
ACN’s cross-motion to compel arbitration sought two extraordinary types of
relief. First, ACN argued that Plaintiffs should be compelled “to submit [their]
discovery dispute [with ACN] to arbitration.” SA120-21. Second, ACN urged the
district court to compel arbitration of the entire lawsuit between Plaintiffs and
Defendants. See id. The district court correctly rejected both requests.
On appeal, ACN appears to have abandoned the first argument and doubled
down on its contention that the whole case should be diverted to arbitration, either
to arbitrate the merits or to arbitrate whether it is subject to arbitration. See ACN Br.
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24-26.15 But ACN’s position rests on a deeply flawed premise: namely, that a non-
party subpoena recipient can file a motion to compel arbitration of any federal case
involving anyone with whom it has ever signed an arbitration agreement—even if
the non-party has not been sued in the action; even if the non-party faces no risk of
liability, damages, or indemnification; even if the non-party has declined to seek
intervention in the case despite every chance to do so; and even if the actual parties
to the litigation have never agreed with anyone to arbitrate claims against each other.
That cannot be. ACN does not identify—and we have not discovered—any
court holding that a non-party can force a pending federal case into arbitration
without joining the fray itself. For good reason. That theory would invite disruption
in the federal courts and undermine the judicial process. In practice, it would
empower any non-party to commandeer a federal lawsuit, at any stage of the
litigation, simply by invoking the existence of an arbitration agreement with at least
one of the parties. It would enable that non-party to enjoy the benefits of being a
party to the case without shouldering any of the attendant responsibilities. And it
would open the floodgates to countless motions to compel arbitration filed by non-
15 To the extent ACN continues to pursue its narrower request to compel arbitration of its discovery dispute, that argument lacks merit for the many reasons articulated by the district court and in Plaintiffs’ opposition to ACN’s stay request. See SPA-31-34; ECF No. 114 at 11-13.
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parties with only a tangential role in an action—or perhaps even in response to a run-
of-the-mill subpoena.
Consider, for instance, a case where a plaintiff sues a defendant and, during
discovery, someone subpoenas a non-party bank for financial records. Nearly
everyone has an arbitration agreement with their bank (and many such agreements
include delegation provisions). Under ACN’s mistaken view, the FAA might well
empower the non-party bank in every such case to file a motion to compel arbitration
of the entire lawsuit. Even recognizing and fully honoring the FAA’s statutory policy
favoring arbitration, that cannot be—and it is not—the law.
ACN’s cross-motion thus fails for several independent reasons. First, the
district court lacked subject-matter jurisdiction over ACN’s cross-motion to compel
because there is no case or controversy between Plaintiffs and ACN. Second, ACN
seeks relief—an order requiring Plaintiffs to arbitrate claims against Defendants,
even though Plaintiffs have no such agreement with Defendants—inconsistent with
bedrock principles of consent. Finally, ACN’s motion to compel is procedurally
defective: as a non-party, ACN had no procedural basis to submit this filing.
In the end, neither law nor equity endows ACN with the prerogative to
weaponize its arbitration agreement to hijack a federal case in which is not a party,
sideline the presiding Article III judge, and force the case into arbitration against the
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parties’ will. The district court was right to reject ACN’s unprecedented bid to
compel arbitration of this case, and this Court should affirm that decision.
A. The district court lacked subject-matter jurisdiction over ACN’s motion to compel arbitration
The district court declined to “compel arbitration of the entire dispute,”
holding that ACN had no “standing” to seek that relief. A558. This conclusion was
sound, since ACN’s attempt to force Plaintiffs into arbitration fails for the most basic
reason imaginable: there is no “actual case or controversy” between Plaintiffs and
ACN. See O’Shea v. Littleton, 414 U.S. 488, 493 (1974). And that threshold
constitutional requirement is a prerequisite for the relief ACN seeks. Without an
actual controversy, the district court did not have subject-matter jurisdiction over
ACN’s motion to compel arbitration. See SM Kids, LLC v. Google, LLC, 963 F.3d
206, 211 (2d Cir. 2020) (Article III “limits the subject-matter jurisdiction of the
federal courts to ‘Cases’ and ‘Controversies’”). This Court can affirm the denial of
ACN’s motion on that ground alone. See Vaden v. Discover Bank, 556 U.S. 49, 72
(2009) (reversing an order compelling arbitration because district court lacked
subject-matter jurisdiction over the underlying controversy at issue).
The starting point for this analysis is Section 4 of the FAA, which provides
that a party may petition for an order compelling arbitration in “any United States
district court which, save for the [arbitration] agreement, would have jurisdiction
under title 28, in a civil action . . . of the subject matter of a suit arising out of the
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controversy between the parties.” Section 4 thus imposes a jurisdictional limit on
judicial consideration of petitions to compel arbitration. Notably, this requirement
cannot be satisfied by reference to Section 4 itself, which does not vest federal courts
with any additional subject matter jurisdiction. See Hall Street Assocs. v. Mattel,
Inc., 552 U.S. 576, 581-82 (2008). And the Supreme Court has clarified that a
dispute between parties “over the arbitrability of their claims,” Vaden, 556 U.S. at
63, does not satisfy the jurisdictional requirements of Section 4, id. at 62. Instead, a
district court has subject-matter jurisdiction to compel arbitration under the FAA
only if—assuming no arbitration agreement existed—“the entire, actual
‘controversy between the parties,’ as they have framed it, could be litigated in federal
court.” Id. at 66 (quoting 9 U.S.C. § 4). The “parties,” for the purpose of Section 4,
are the signatories to the arbitration agreement, not the parties to the litigation. See
Doctor’s Assocs., Inc. v. Distajo, 66 F.3d 438, 445 (2d Cir. 1995).
Applied here, these rules required the district court to “look through” the
dispute about arbitrability and ask whether it had subject-matter jurisdiction over an
actual case or controversy between Plaintiffs and ACN. See Vaden, 556 U.S. at 66.16
16 This Court modifies the “look through” approach in one small way unrelated to the actual-controversy requirement. When evaluating whether complete diversity is satisfied, the district court assessing its jurisdiction over an FAA petition looks only to the citizenship of the parties to the petition to compel, not all the way through to the parties to the underlying litigation. See Hermès of Paris, Inc. v. Swain, 867 F.3d 321, 324 (2d Cir. 2017).
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As the district court correctly perceived, it lacked such jurisdiction. Plaintiffs have
sued Defendants, not ACN. ACN did not intervene, has not been impleaded, is not
actually a party to the proceedings, and faces no risk of liability, damages, or
indemnification. In other words, there is no “case or controversy” between Plaintiffs
and ACN here, and so the district court does not possess subject matter jurisdiction
over any dispute between them. See Spokeo, Inc. v. Robins, 136 S. Ct 1540, 1547
(2016) (emphasizing the basic “constitutional limitation of federal-court jurisdiction
to actual cases and controversies.”); Paul Revere Variable Annuity Ins. Co. v.
Kirschhofer, 226 F.3d 15, 26 (1st Cir. 2000) (holding that there was no subject-
matter jurisdiction over a motion to compel arbitration by a party that had been
dismissed with prejudice, because “[a] mere interest in a situation—no matter how
deeply felt, or how important the issue—will not substitute for actual injury”).17
17 As the district court correctly held, there is plainly no independent jurisdictional basis to compel arbitration of a discovery dispute involving Plaintiffs and ACN. A557. The district court’s power to adjudicate those disputes derives from its subject-matter jurisdiction over the underlying action between Plaintiffs and Defendants—not ACN. See United States v. Morton Salt Co., 338 U.S. 632, 641-642 (1950) (noting that the judicial subpoena power derives from and is coextensive with the court’s power to adjudicate cases and controversies); Houston Bus. Journal, Inc. v. Office of Comptroller of Currency, U.S. Dep’t of Treasury, 86 F.3d 1208, 1213 (D.C. Cir. 1996) (noting that discovery devices “are not free-standing,” but rather exist “to facilitate the resolution of actions cognizable in federal court”).
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ACN cannot fix this clear jurisdictional defect by theorizing that Plaintiffs’
lawsuit against Defendants is “litigation by proxy” against ACN.18 The Supreme
Court’s decision in Vaden expressly forbids such efforts to recast litigation in service
of manufacturing federal subject-matter jurisdiction. Specifically, Vaden recognized
that when “actual litigation has defined the parties’ controversy,” 556 U.S. at 68, the
district court is bound by the case “as [the parties] have framed it.” Id. at 66. The
district court cannot “hypothesize[] discrete controversies of its own design” in order
to invent subject-matter jurisdiction. Id. at 67. Nor can the district court allow the
party seeking to compel arbitration to “recharacterize an existing controversy” or
“manufacture a new controversy” in “an effort to obtain a federal court’s aid in
compelling arbitration.” Id. at 68.
Put simply: Section 4 of the FAA “does not invite federal courts to dream up
counterfactuals when actual litigation has defined the parties’ controversy.” Id. Here,
the “actual litigation” is between Plaintiffs and Defendants; ACN is merely a non-
party subpoena recipient facing no risk of liability or damages. There is no “case or
18 Indeed, ACN’s arguments about the scope of the “dispute” it seeks to arbitrate have grown ever larger as this case has progressed. Compare A556-58 (the district court, ruling primarily on the “issue of whether the discovery dispute should be arbitrated,” and in the alternative rejecting the argument “to the extent that ACN is asking me to compel arbitration of the entire dispute”), with ACN Br. at 18 (defining “[t]his dispute” as “framed by Plaintiffs’ Complaint, ACN’s arbitration demand, or even the district court’s narrow ‘discovery dispute’”).
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controversy” at all between Plaintiffs and ACN, perhaps apart from the dispute over
whether to arbitrate (which does not count in assessing jurisdiction under Section 4).
The Fourth Circuit’s decision in Community State Bank v. Knox is instructive.
See 523 F. App’x 925 (4th Cir. 2013). Knox found subject-matter jurisdiction lacking
in a case, like this one, involving an attempt to compel arbitration by an entity that
was not a party to the underlying litigation. See id. There, individual plaintiffs sued
payday loan servicers on various state law theories, but did not sue the bank that
issued the loans (in fact, the plaintiffs specifically disclaimed any future action
against the bank). Id. at 927. The bank later filed a petition to compel arbitration in
district court under Section 4 of the FAA. Id. The Fourth Circuit held that there was
no “independent jurisdictional basis” to support that petition because the bank “ha[d]
no stake” in the case against the individual plaintiffs. Id. at 930. The court further
concluded that “[t]he underlying controversy between the parties is concretely
defined” by the existing litigation, id., and that this litigation “comprise[d] the actual
controversy between the parties,” id. at 931. In addition, the claims in the existing
litigation “were not brought against [the bank], are distinct from any claims that
could be made against [the bank], and do not implicate any interest [of the bank] that
could be compelled to arbitration by federal court.” Id. at 932. The Fourth Circuit
“fail[ed] to see any other underlying dispute” between the bank and the plaintiffs
that could support a motion to compel arbitration, and rejected the bank’s “invitation
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to invent one or allow a purely hypothetical future claim” to provide a basis for
jurisdiction. Id. at 930.19 Concluding that “there is no controversy” between the bank
and the plaintiffs, id. at 931, the Fourth Circuit “decline[d] to reach beyond the
existing litigation in search of a basis for federal jurisdiction,” id. at 932.20
This Court should do the same. After “looking through” to the underlying
dispute, the result is clear—there is no controversy between Plaintiffs and ACN. The
district court’s rejection of ACN’s motion to compel arbitration should be affirmed.
B. The FAA does not allow ACN to compel arbitration of claims brought against Defendants
Under the FAA, arbitration “is a matter of consent, not coercion.” JLM Indus.
v. Stolt-Nielsen SA, 387 F.3d 163, 171 (2d Cir. 2004) (quoting Volt Info. Scis. v. Bd.
19 The court noted in passing that the bank had not asked the plaintiffs to arbitrate any claim before filing its petition. See Knox, 523 F. App’x at 931 & n.5. But the Fourth Circuit did not rely on that fact and instead based its rejection of the petition on its conclusion that “[t]o the extent the Petition describes the real controversy that [the bank] seek[s] to have arbitrated, that controversy is embodied” in the existing litigation in which the bank was not involved. Id. at 932. The same is true here: The dispute ACN wants diverted to arbitration is this litigation between Plaintiffs and Defendants. And in this litigation, there is no case or controversy between Plaintiffs and ACN. 20 In Community State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011), the Eleventh Circuit indicated that a potential federal claim could provide subject-matter jurisdiction over a petition to compel arbitration. Id. at 1260. The Fourth Circuit’s decision not to follow Strong into the realm of “pure speculation” is well founded, and this Court should not follow it either. See Knox, 525 F. App’x at 931. Knox is truer to Vaden, which makes clear that “Section 4 does not invite federal courts to dream up counterfactuals when actual litigation has defined the parties’ controversy.” Vaden, 556 U.S. at 68.
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of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)). For that reason,
“‘a party cannot be required to submit to arbitration any dispute which [it] has not
agreed so to submit.’” Id. (quoting Vera v. Saks & Co., 335 F.3d 109, 116 (2d Cir.
2003)). This fundamental precept of arbitration law offers yet another reason for
affirming the decision below.
Plaintiffs signed arbitration provisions with ACN (not Defendants) and agreed
to arbitrate a confined set of claims: those “dispute[s] between me and ACN.” A436
¶ 16; A439 ¶ 16; see also A442 ¶ 17 (“between ACN and me”). Here, Plaintiffs have
no dispute with ACN, which is not a party and which faces no claims. The only
claims alleged in the Amended Complaint are against Defendants. Because Plaintiffs
have not manifested their consent to arbitrate any claims against Defendants,
Plaintiffs have no obligation to arbitrate with them.
In an attempt to evade that straightforward result, ACN accuses Plaintiffs of
“evasive pleading and litigation by proxy,” insisting that Plaintiffs’ case and claims
against Defendants are really claims against ACN. ACN Br. 19, 20 (calling itself a
“defendant in all-but-name”). That is a ridiculous argument. There is no such thing
as a “defendant in all-but-name.” ACN’s tactical attempt to rewrite the Amended
Complaint to trigger the arbitration agreement—albeit without incurring any risk
that it will face damages or liability—is therefore unavailing. Cf. Romana v.
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Kazacos, 609 F.3d 512, 518 (2d Cir. 2010) (holding that the “plaintiff is the master
of his complaint” when it comes to matters of federal jurisdiction).
In any event, even if this Court treated Plaintiffs’ claims against Defendants
as de facto claims against ACN, or concluded that this issue is itself delegated to an
arbitrator, that would not entitle ACN to the sweeping relief it seeks: namely, an
order submitting this entire case to arbitration. The principle of consent is always the
touchstone of arbitration analysis. ACN’s agreement with Plaintiffs at most requires
that any dispute between Plaintiffs and ACN (such as the dispute against it that ACN
professedly perceives) proceed in arbitration. But to the extent Plaintiffs’ claims run
against Defendants, who possess no arbitral rights against Plaintiffs, they must
remain in federal court, since this Court is bound to respect the absence of consent
to arbitrate no less than its presence. See Granite Rock Co. v. Int’l Bhd. of Teamsters,
561 U.S. 287, 297 (2010) (noting that “unusual facts” require “reemphasiz[ing]” that
“a court may order arbitration of a particular dispute only where the court is satisfied
that the parties agreed to arbitrate that dispute” (emphasis in original)); see also
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985) (noting that “[t]he
preeminent concern of Congress in passing the [FAA] was to enforce private
agreements into which parties had entered . . . even if the result is ‘piecemeal’
litigation”); Sokol Holdings, Inc., v. BMB Munai, Inc., 542 F.3d 354, 363 (2d Cir.
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2008) (engaging in claim-by-claim analysis and finding “one of Sokol’s claims . . .
to be arbitrable, while the others are not”).
Simply stated, neither the arbitration agreement nor its delegation provision
affords any basis for ACN to obtain an order requiring Plaintiffs to arbitrate claims
against Defendants, with whom they have no contractual agreement to arbitrate.
ACN’s contrary arguments only confirms ACN’s willingness to cast aside principles
of consent, and the normal rules of litigation and arbitration, in this proceeding.
C. ACN’s cross-motion to compel arbitration was procedurally improper
ACN’s efforts to force this case into arbitration fail for another independent
reason: the manner in which ACN presented its arbitration demand below was
procedurally improper. See A558. As a matter of settled federal practice, ACN’s
non-party “Memorandum of Law in Opposition to Plaintiff’s Motion to Compel
Compliance with Subpoena and in Support of Cross-Motion to Compel Arbitration”
was not a filing the Federal Rules of Civil Procedure permit. SA108-55.
When someone who has not been sued believes that they require judicial
assistance to initiate arbitration, they have two basic options. See Matter of
Arbitration Between Chung & President Enters. Corp., 943 F.2d 225, 228 (2d Cir.
1991)
First, they can initiate a standalone proceeding in federal court and petition
for an order compelling arbitration, provided that they satisfy the requirements of
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the FAA. See Vaden, 556 U.S. at 54-55; see also, e.g., ISC Holding AG v. Nobel
Biocare Fin. AG, 688 F.3d 98, 114-15 (2d Cir. 2012) (noting that 9 U.S.C. § 4 allows
a party to “initiate[] a Title 9 proceeding” in federal court under certain
circumstances); Matter of Arbitration Between Chung & President Enters. Corp.,
943 F.2d 225, 228 (2d Cir. 1991) (“A petition to stay or to compel arbitration can
arise in one of two ways: it may be ‘embedded’ in pending litigation or it may be
initiated by an independent proceeding.”). It is clear why ACN did not choose that
course here: Had ACN filed a separate proceeding seeking an order compelling
arbitration of Plaintiffs’ case against Defendants—to which ACN is not a party and
which the actual parties have been litigating for over a year—it would have faced
grave obstacles (including an inability to satisfy Section 4’s jurisdictional
requirements, for the reasons described above, see supra, 62-67).
ACN’s other option, if it genuinely believed its interests were implicated by
this existing litigation, was to file a motion for leave to intervene (and to then file a
motion to compel arbitration). See Fed. R. Civ. P. 24. But that route would have
required ACN to take risks, including “the risk that its position [would] not prevail
and that an order adverse to its interests [would] be entered.” Schneider v.
Dumbarton Developers, Inc., 767 F.2d 1007, 1017 (D.C. Cir. 1985).
Instead of filing a standalone action, or filing a motion to intervene, ACN
decided to remain a non-party, free of all the risks and responsibilities that parties
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must assume. But having made that strategic choice, ACN had no procedural
standing to file any motion in this proceeding, much less a dispositive motion
targeted at diverting all of the claims in this case into private arbitration. See
Martindell v. Int’l Tel. & Tel. Corp., 594 F.2d 291, 294 (2d Cir. 1979) (discussing
the need for intervention before a non-party may “insinuate itself into a private civil
lawsuit between others”); see also, e.g., Hispanic Soc. of New York City Police Dep’t
Inc. v. New York City Police Dep’t, 806 F.2d 1147, 1154 (2d Cir. 1986) (“Because
the requirements for intervention as a party have been ignored, the people pursuing
this appeal have no more standing than individuals selected at random from a
telephone book.”); Minneapolis-Honeywell Regulator Co. v. Thermoco, Inc., 116
F.2d 845, 848 (2d Cir. 1941) (Hand, J.) (“If the companies had wished to enjoy the
privileges following upon the status of a party, they should have become parties if
they could. If they could not, a fortiori they should not have privileges of a party.”).21
The fact that ACN received a non-party subpoena under Rule 45 does not
change this bedrock limitation on its procedural prerogatives. Rule 45 does not throw
open the courthouse door to whatever motions a non-party subpoena recipient
21 See also Katel Liab. Co. v. AT&T Corp., 607 F.3d 60, 63 (2d Cir. 2010) (noting that a non-party “intervened” before it “moved to compel arbitration”); Process & Indus. Developments Ltd. v. Fed. Republic of Nigeria, 962 F.3d 576, 585 (D.C. Cir. 2020) (noting that Federal Rule of Civil Procedure 7(b) “permits any party to file a written motion state the relief sought and the grounds for seeking it” (emphasis added)).
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wishes to file. Instead, it provides a non-party subpoena recipient with a defined
menu of options for responding: (1) compliance with the subpoena (id. 45(e)); (2)
objecting to the subpoena (id. 45(d)(2)(B)); (3) moving to quash or modify the
subpoena under specific enumerated circumstances (id. 45(d)(3)); (4) moving for a
protective order (id. 45(e)(2)); or (5) in certain circumstances not relevant here,
transferring a subpoena-related motion to a different court ((id. 45(f)). Needless to
say, cross-moving to compel the entire case into arbitration is not one of those
options. See 9A Wright & Miller, Fed. Prac. & Proc. Civ. § 2459 (3d ed. 2020)
(discussing a court’s “options” without identifying consideration of compelling
arbitration).
The FAA does not alter that understanding. To the contrary, it requires that
“[a]ny application to the court hereunder shall be made and heard in the manner
provided by law for the making and hearing of motions, except as otherwise herein
expressly provided.” 9 U.S.C. § 6.22 Section 4 of the FAA does not “expressly
provide[]” for non-parties to file petitions to compel arbitration in circumstances
otherwise precluded by the Federal Rules of Civil Procedure. Indeed, the “only”
language in Section 4 that “express[ly]” overrides the Federal Rules of Civil
22 Conversely, the Federal Rules of Civil Procedure “govern proceedings under” the FAA “to the extent applicable . . . except as [the FAA] provide[s] other procedures.” Fed. R. Civ. P. 81(a)(6)(B).
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Procedure is language not implicated here: Section 4’s separate guarantee of a
summary jury trial “‘[i]f the making of the arbitration agreement or the failure,
neglect, or refusal to perform’” is disputed. World Brilliance Corp. v. Bethlehem
Steel Co., 342 F.2d 362, 364-65 (2d Cir. 1965) (quoting 9 U.S.C. § 4).23
There was thus no basis in the FAA, or Rule 45, or any other rule, for ACN
to file a cross-motion to compel arbitration in response to a non-party subpoena. As
a non-party that decided against intervening in this litigation to protect the rights it
claims are threatened, ACN must be held to its choice. Like any other non-party,
ACN had no prerogative to move to compel this litigation into arbitration and so the
decision below denying its defective cross-motion should be affirmed.
D. ACN’s “equitable estoppel” theory is forfeited and meritless
In a final effort to drum up a justification for the unprecedented relief it seeks,
ACN now contends that the doctrine of equitable estoppel (or, at least, a theory
loosely inspired by it) can be applied to its own demand to arbitrate. ACN Br. 50-
58. This position, advanced for the first time on appeal, is forfeited and meritless.
23 Moreover, in interpreting Section 3 of the FAA, the Supreme Court has recognized the importance of distinguishing between the procedural prerogatives afforded to parties and non-parties to litigation. See Arthur Andersen, LLP v. Carlisle, 556 U.S. 624, 630 n.4 (2009) (“[W]e would not be disposed to believe that the statute allows a party to the contract who is not a party to the litigation to apply for a stay of the proceeding.”).
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1. ACN’s “equitable estoppel” theory is forfeited
As an initial matter, ACN’s new equity-based arguments are forfeited and
should be disregarded on that basis alone. ACN did not mention any basis for
compelling arbitration remotely like this in its briefs below, which mentioned neither
equity nor estoppel. See SA 108-55. Nor did ACN invoke any such theory after the
district court denied ACN’s motion and the parties briefed ACN’s request for a stay
of that decision. See D. Ct. ECF No. 244. As a consequence, the district court had
no occasion to pass upon it. This is a classic forfeiture, particularly because the see-
what-sticks creativity of ACN’s latest legal innovation would require the Court to
take up a “complex and novel” argument without the benefit of ventilation below.
See Pulvers v. First UNUM Life Ins. Co., 210 F.3d 89, 95-96 (2d Cir. 2000).
2. ACN’s “equitable estoppel” theory is meritless
If this Court does take up ACN’s “equitable estoppel” arguments, it should
reject them, first and foremost because they are wholly inapposite to the issue at
hand. As discussed above, the law of equitable estoppel exists to answer a particular
question: when a non-signatory wants to invoke an arbitration agreement, how can
it establish that a signatory to the contract “consented to extend its agreement”? See
Sokol Holdings, Inc., 542 F.3d at 361. That is not what ACN—as a signatory to the
contract, but a non-party to the litigation—seeks to do. See ACN Br. at 55 (“ACN . . .
does not seek to extend the scope of the arbitration provisions even an inch.”). And
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so the doctrine of “equitable estoppel” is necessarily unavailable to ACN. On their
face, ACN’s arguments are a category error: they take a doctrine built to address a
specific issue involving non-signatories and seek to repurpose it for non-parties,
when doing so undermines the entire premise and rationale of the doctrine.24
Stripped of its ill-fitting doctrinal garb, ACN’s “equitable estoppel” argument
is no more than a request for this Court to make freewheeling equitable judgments
on issues where settled law defeats ACN’s positions. ACN is up front about this: its
entire argument proceeds from the premise that the Court can and should rely on
“inherent equitable authority” to compel arbitration. ACN Br. at 50. In other words,
ACN contends that the district court should have compelled arbitration even if the
FAA does not, by its terms, authorize the irregular order that it seeks.
That is not the law. “[B]efore invoking the [delegation] principle,” ACN must
persuade the Court that the matter it seeks to arbitrate “‘is within the coverage of’”
the FAA. New Prime Inc. v. Oliveira, 139 S. Ct. 532, 538 (2019) (quoting Prima
24 This category error leads ACN to rely heavily on Grigson v. Creative Artists Agency, LLC, 210 F.3d 524 (5th Cir. 2000). See ACN Br. 56-57. That case did not involve a non-party subpoena recipient seeking to enforce an arbitration agreement against a signatory party. Rather, as an equitable estoppel case, it involved one party to a case seeking to enforce an arbitration agreement it had not signed against another party who had. Plaintiffs have already explained why that case is unpersuasive in response to Defendants (who at least present a potentially relevant fact pattern). See supra, 37-40. For ACN’s purposes, Grigson is even farther afield.
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Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402 (1967)). Its inability to
meet that standard precludes any prerogative to compel this case into arbitration.
Moreover, the equitable considerations that ACN advances do not justify the
extraordinary remedy it seeks. ACN claims to be a “defendant in all-but-name” in
these proceedings—“in every meaningful respect a party.” ACN Br. at 20, 53. On
that basis, it urges the Court to compel arbitration. But its premise is simply wrong.
ACN is not a defendant here, and it is reaping the benefits of that status. It has not
been sued. No claims have been brought against it. None of Plaintiffs’ claims asserts
that ACN breached any provision of the IBO agreements or failed to fulfill any
binding commitment it made to them.25 ACN faces no liability, and in fact it
“expressly denies liability for indemnification, contribution, or otherwise based on
any judgment below.” ECF No. 84 (ACN Motion for Stay) at 3 n.1. While ACN
faces the prospect of discovery, it is in that respect indistinguishable from countless
non-parties who routinely fulfill such obligations. Indeed, the district court is in the
process of entertaining and carefully mediating ACN’s concerns about the scope of
its obligations, and it is well-equipped to do so. See A539. What ACN actually
requests—in the name of “equity”—is to be treated as though it were a defendant
25 The “inequities” ACN says that it faces here are therefore very different from the equities in Grigson, where the claims against the non-signatories turned on whether the signatory had complied with various contractual provisions. Compare 210 F.3d at 529-30.
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without any of the risks or duties that accrue to actual party defendants. There is
nothing equitable about that position and no court has ever upheld it.
ACN separately suggests that Plaintiffs have “blocked” ACN from arbitrating
by “refusing to disclose their true identities.” ACN Br. 57. But it was ACN who
refused to sign the straightforward protective order that governs discovery in this
case. See A427-33. In fact, ACN and Plaintiffs were making progress toward a
mutually agreeable resolution of ACN’s objections when Defendants and ACN took
these appeals. See D. Ct. ECF No. 256. If the proceedings below had not been stayed
(in part at ACN’s request), ACN might already have the information about Plaintiffs
that it seeks. Asking this Court to invent and wield “inherent equitable authority” in
such an unparalleled manner requires vastly more justification than that.
The remainder of ACN’s equitable estoppel briefing is essentially an amicus
brief in support of Defendants’ arguments on the relevant points. For the reasons
explained above, Defendants are not entitled to equitable estoppel. See supra, 23-
40. And because Plaintiffs did not consent to arbitrate delegation issues or anything
else with Defendants, Plaintiffs’ claims belong in federal court.
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CONCLUSION
For the foregoing reasons, this Court should affirm the district court’s orders
denying Defendants’ and ACN’s motions to compel arbitration, lift the stay pending
appeal, and remand this case for further proceedings.
August 31, 2020 Respectfully submitted,
/s/ Roberta A. Kaplan Roberta A. Kaplan John C. Quinn Joshua Matz Alexander J. Rodney Raymond P. Tolentino Michael Skocpol KAPLAN HECKER & FINK LLP 350 Fifth Avenue | Suite 7110 New York, NY 10118 (212) 763-0883 [email protected] Andrew G. Celli, Jr. O. Andrew F. Wilson EMERY CELLI BRINCKERHOFF ABADY
WARD & MAAZEL LLP 600 Fifth Avenue at Rockefeller Center New York, NY 10020 (212) 763-5000 [email protected] Counsel for Plaintiffs-Appellees
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CERTIFICATE OF COMPLIANCE
This brief complies with the type-volume limitation of Fed. R. App. P.
32.1(a)(4), as modified by this Court’s August 24, 2020 Order granting Plaintiffs
“permission to file an oversized brief not to exceed 20,000 words.” ECF No. 166.
This brief contains 19,455 words, excluding the parts of the brief exempted by Fed.
R. App. P. 32(f).
This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5)
and the type-style requirements of Fed. R. App. P. 32(a)(6), because this brief has
been prepared in a proportionally spaced typeface using Microsoft Word for Office
365 in size 14 Times New Roman font.
Dated: August 31, 2020 /s/ Roberta A. Kaplan
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CERTIFICATE OF SERVICE
I hereby certify that on August 31, 2020, I electronically filed the foregoing
with the Clerk of the United States Court of Appeals for the Second Circuit via the
Court’s CM/ECF system, which will send notice of such filing to all counsel who
are registered CM/ECF users.
Dated: August 31, 2020 /s/ Roberta A. Kaplan
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